Sustainability Report 2012

NIPPON PAPER GROUP Sustainability Report 2012 Detailed Edition NIPPON PAPER GROUP, INC. GROUP, PAPER NIPPON Editorial Policy

The Nippon Paper Group has this year published an English-language detailed edition sustainability report to provide both in-house and external stakeholders an in-depth account of the Group’s corporate social responsibility (CSR) activities. In addition, the Group has published an annual report covering the economic and financial aspects of the Group’s activities.

Sustainability Report 2012 (Highlight Edition, Japanese only) Most Material In order to enhance communication, the Nippon Paper Group has drawn attention of stakeholders Issues

Matters holding the from its wide-ranging CSR activities to provide an easy-to-read highlight Sustainability Report edition that focuses on matters of particular interest to stakeholders as (Highlight Edition, well as activities that the Company considers are of major importance. Japanese only)

Major Efforts Sustainability Report 2012 (Detailed Edition) This Report Regarding CSR The Nippon Paper Group has endeavored to provide a full and Sustainability Report (Detailed Edition) comprehensive account of its major CSR activities in an effort to promote in-depth information disclosure and to ensure accountability. Referring to the ISO 26000 standard, which provides voluntary guidance on social responsibility, this Sustainability Report 2012 also outlines the connection Matters the Company between seven core subjects and disclosure items. (Please refer to the considers important bottom of page 3.)

The Selection of Reporting Items The selection of reporting items was made taking into consideration matters holding the attention of stakeholders and items that the Company considers are of major importance. Selection was also based on an exhaustive review of issues of priority to society drawing on a wide variety of sources including past questionnaire surveys, guidelines and other requirements, daily communication activities and SRI research.

Period Covered April 1, 2011–March 31, 2012* Nippon Paper Group, Inc. and the companies listed above * Includes some information from before April 1, 2011 and after March 31, 2012 are defined as “the Company” and “The Nippon Paper Group,” respectively, in this report. In addition, the four Scope of Organizations Covered companies Nippon Paper Industries Co., Ltd., Nippon This report positions Nippon Paper Group, Inc., the holding Daishowa Paperboard Co., Ltd., NIPPON PAPER-PAK CO., company, as the principal reporting entity, while also LTD., and Nippon Paper Chemicals Co., Ltd. merged on covering the activities of the Company as well as its 48 October 1, 2012 with Nippon Paper Industries Co., Ltd. as consolidated subsidiaries. the surviving company. Certain information relating to more recent data is based on the Group’s company structure The scope of the report covers the basic environmental following the merger. The date is identified as appropriate in policies, systems, environmental accounting and environment each instance. performance data of the following 24 companies, which include all major production bases. Also included within Referenced Guidelines the scope of the report is data for six non-consolidated •Environmental Reporting Guidelines (2012) of the Ministry of subsidiaries of the aforementioned major production bases. the Environment Consolidated: Nippon Paper Group, Inc.; Nippon Paper Industries •Sustainability Reporting Guidelines (Version 3.1) issued by Co., Ltd.; Nippon Daishowa Paperboard Co., Ltd.; Nippon Paper the Global Reporting Initiative (GRI) Crecia Co., Ltd.; Nippon Paper Papylia Co., Ltd.; SHIKOKU •United Nations Global Compact COCA-COLA BOTTLING CO., LTD.; NIPPON PAPER-PAK CO., LTD.; Nippon Paper Chemicals Co., Ltd.; Nippon Paper Lumber •ISO 26000, etc. Co., Ltd.; NP Trading Co., Ltd.; Nippon Paper Development Co., Ltd.; KOYO PAPER MFG. CO., LTD.; Kitakami Paper Co., Ltd.; Nippon Paper Industries USA Co., Ltd.; Nippon Seitai Corporation; PAL WOOD MATERIAL CO,. LTD.; PAL CO., LTD.; N&E Co., LTD.; Disclaimer Daishowa Uniboard Co., Ltd. This report includes statements of fact and historical data as well as plans, (The contribution to total consolidated sales of the forecasts and estimates (forward-looking statements) based on the business plan companies listed here was 89%). and policies of the Nippon Paper Group. These forward-looking statements are the result of assumptions or judgments based on currently available information as this report was prepared. Be advised that the estimates described in the Non-consolidated: Akita Jujo Chemicals Co., Ltd.; SOKA PAPER- forward-looking statements may differ significantly from actual results due to a PAK CO., LTD.; EGAWA PAPER-PAK CO., LTD.; MIKI PAPER-PAK number of important factors including future business activities and changing CO., LTD.; ISHIOKA KAKO CO., LTD.; Nakoso Film Co., Ltd. market conditions.

2 Nippon Paper Group Sustainability Report 2012 Contents

Editorial Policy 2 Customer Responsibility 67 Message from the President 4 Management Approach 68 Report Policy and Management Reconstruction following Efforts with regard to Issues 70 the Great East Japan Earthquake 6 Activities of Nippon Paper Industries Co., Ltd. / Activities of Nippon Daishowa Paperboard Co., Ltd. / Activities of Special Feature Nippon Paper Crecia Co., Ltd. / Activities of Nippon Paper Building a Sustainable Future 12 Papylia Co., Ltd. / Activities of SHIKOKU COCA-COLA Outline of the Nippon Paper Group 16 BOTTLING CO., LTD. / Development of Environmentally Friendly Products Management Responsibility 19 Human Rights, Employment and Management Approach 20 Labor Responsibility 83 Group Governance / CSR Management / Compliance / Information Disclosure and Investor Relations; Profit Management Approach 84 Distribution to Shareholders / Dialog with Stakeholders Policy and Management / The Status of Employment and Industrial Relations Environmental Responsibility 31 Efforts with regard to Issues 86 Management Approach 32 Creating Workplaces that Support Employee Diversity / Policy and Management / Material Balance Cultivating Human Resources / Occupational Safety and Health Efforts with regard to Issues 40 Mitigation of Climate Change / Biodiversity Conservation / Community Responsibility 93 Reducing Waste Generation and Final Disposal / Initiatives to Prevent Environmental Pollution / Promotion of Recycled Management Approach 94 Paper Use Policy and Management Material Procurement and Efforts with regard to Issues 96 Forest Responsibility 53 Educational Activities / Environmental Activities / Activities Aimed at Promoting Coexistence with Local Communities Management Approach 54 and Society Policy and Management / Current Status of Raw Materials Procurement Guideline Comparison Table (GRI Ver 3.1) 100 Guideline Comparison Table (Enviromental Efforts with regard to Issues 56 Reporting Guidelines (2012)) Sustainable Procurement of Raw Materials / Protection and Comparison Table (the United Nations Cultivation of Domestic Company-owned Forests / Global Compact) 102 Contributing to Local Communities in Overseas Afforestation Areas / Stable Procurement of Recycled Paper Third-Party Comments 103 Action in Response to Third-Party Comments 103

The Connection between the Seven Core Subjects of ISO 26000 and Disclosure Items The Nippon Paper Group is guided by ISO 26000 in its efforts to fully grasp the needs of society and engage in comprehensive information disclosure. The connection between the disclosure items of the Group’s Sustainability Report 2012 (Detailed Edition) and the seven core subjects of ISO 26000 is presented as follows. Recognizing that the Nippon Paper Group, which relies heavily on timber as a source for manufacturing paper and related products, has a particularly close association with forests compared with other industries, this report includes a section on material procurement and forest resources that is independent of the section on the environment. In addition, steps have been taken to comment on the Group’s responsibility with respect to management encompassing organizational governance as well as fair operating practices and responsibility with respect to human rights, employment and labor covering human rights and labor practices.

ISO 26000 Core Subjects

Organizational Fair Operating The Consumer Human Labor Community Practices Rights Practices Involvement and Governance Environment Issues Development

Material Human Rights, Management Environmental Procurement Customer Employment Community Responsibility Responsibility and Forest Responsibility and Labor Responsibility Responsibility Responsibility

Nippon Paper Group Sustainability Report 2012 3 Message from the President

We will carve out a new future by promoting growth as a comprehensive player in biomass businesses while harnessing the experience gained in overcoming the earthquake disaster.

The Nippon Paper Group will create a new future by building on the experience gained in overcoming adversity.

2011 was a difficult year. The Great East Japan Earthquake, flooding in Thailand, and the financial crisis in Europe all had a dampening effect on conditions around the world. The earthquake disaster in Japan, in particular, took its toll on both domestic and overseas markets. For its part, the Nippon Paper Group was not spared from the disaster with damage to production bases in the Tohoku region including the Ishinomaki, Iwanuma, and Nakoso mills owned and operated by Nippon Paper Industries Co., Ltd. While all production facilities at the Iwanuma and Nakoso mills resumed operations in May 2011, rebuilding the mainstay Ishinomaki Mill, which bore the full brunt of the tsunami, was a major issue throughout fiscal 2011. The Nippon Paper Group faced considerable difficulty in bringing about a recovery of the Ishinomaki Mill damaged by the tsunami. This included the removal of large volumes of debris and rubble. Thanks largely to the support of all related parties and the unified efforts of the Group, production facilities including paper machines resumed operations on a progressive basis from September 2011 with a full restoration completed on August 30, 2012 according to plans. I would like to extend my sincere thanks to business partners, equipment manufacturers, local residents, government agencies, Group employees, and their families for their invaluable support. In the immediate aftermath of the earthquake disaster, our energies were directed toward confirming the safety of employees, promoting mutual cooperation with local residents, and ensuring the stable supply of products to customers. In addition, we were able to assist in the reconstruction of devastated areas through the removal of wood debris and the supply of electric power. In working to fulfill our social responsibilities through each of these initiatives, we were again reminded of the inextricable link between corporate and CSR activities. Utilizing the collective capabilities of the Group to carry out reconstruction against adverse conditions provided not only me, but also the entire Group, with considerable confidence. In light of the experience gained, we promoted risk countermeasures including a review of natural disaster response initiatives. With the knowledge acquired while overcoming this crisis, we will chart a new future as a more robust Nippon Paper Group.

4 Nippon Paper Group Sustainability Report 2012 Striving to promote increased growth as a Meeting the expectations and demands of comprehensive player in biomass businesses society while engaging in continuous dialogue

The mission of management is to ensure that it remains one step In working to cultivate and utilize forest resources, the Nippon ahead of even the slightest shift in the market. We have therefore Paper Group is deeply involved in activities that impact the implemented appropriate countermeasures while contributing global environment. In this context, the Group has formulated to reconstruction efforts following the earthquake disaster. In its Green Action Plan and is taking steps to ensure its effective response to the slump in demand in Japan caused by such implementation. Under its Green Action Plan 2015, intended factors as the Lehman Brothers shock in 2008, the Nippon Paper to be completed by fiscal 2015, the Nippon Paper Group has Group put in place its Third Medium-Term Business Plan, which taken into consideration shifts in its business environment as covered the three-year period from fiscal 2009 to fiscal 2011. well as society’s needs while focusing on the additional aspects Under the Plan, we took steps to downsize our domestic paper of the value chain and traceability. In this manner, the Group will business and to focus on such areas as overseas business endeavor to address growing awareness toward the environment growth. Buffeted, however, by a harsh operating environment, by a broad spectrum of stakeholders. the Group recognized the need to further amend its business In pushing forward CSR activities, the Nippon Paper Group is structure in order to promote sustainable development. As a placing particular emphasis on dialogue with stakeholders. While result, in formulating its Fourth Medium-Term Business Plan, working to grasp and remain sensitive to changes in stakeholder the Nippon Paper Group decided to pursue the parallel themes expectations and demands, every effort is being made to enhance of strengthening the earning power of its paper business and corporate value. Cognizant of the dangers posed by climate reinforcing efforts to transform its business structure from 2012. change and the escalating nature of a wide range of global scale Transforming the Group’s business structure entails expanding social issues, the Nippon Paper Group is determined to cooperate into wood-based business fields other than the paper domain. with society and to overcome adversity by adopting the broadest In addition to paper, the Nippon Paper Group has been active in possible perspective. Driven by this determination, Nippon Paper such package material fields as paperboard and paper containers. Group, Inc. is a supporter and advocating participant of the Together with chemical products that utilize wood-based United Nations Global Compact, which raises 10 Principles with materials, the Group has also provided a variety of products using respect to human rights, labor standards, the environment, and wood as a principal raw material. the prevention of corruption. Moreover, the Group uses both construction waste material This Sustainability Report focuses mainly on the Nippon and black liquor, which is a byproduct of paper manufacturing, as Paper Group’s current efforts to support reconstruction following biomass fuels. the Great East Japan Earthquake, build a sustainable society, Looking ahead, and in an effort to forge a position as a and address social issues in the context of the value chain. As comprehensive player in biomass businesses, the Nippon Paper we work toward achieving these goals, taking into account the Group will work to cultivate new businesses that extend beyond expectations and needs of society, we welcome the candid its existing activities while utilizing its accumulated technological comments and opinions of all stakeholders and extend our sincere expertise and strengths. In this regard, the Group is already appreciation for your continued support and understanding. promoting several projects in the biomass energy field, where demand continues to climb, and developing biomass materials as an alternative to petrochemical products. In October 2012, Nippon Paper Industries Co., Ltd. was re- launched as the surviving company and new entity following its merger with Group companies Nippon Daishowa Paperboard Co., Ltd., NIPPON PAPER-PAK CO., LTD., and Nippon Paper Chemicals Co., Ltd. In completing the merger, the Group has integrated the separate and individual growth fields of each company and established a structure that engages actively in promising business fields. On the 20th anniversary since “sustainable growth” was first advocated at the Global Summit in 1992, the Rio + 20: United Nations Conference on Sustainable Development was held in 2012. The Nippon Paper Group is endeavoring to help build a sustainable society by promoting the potential of wood as a Yoshio Haga renewable resource and delivering a wide range of products that President benefit society. Nippon Paper Group, Inc.

Nippon Paper Group Sustainability Report 2012 5 REPORT Reconstruction following the Great East Japan Earthquake

The Great East Japan Earthquake that struck northeastern Japan on March 11, 2011 caused considerable damage to six of the Nippon Paper Group’s production bases. On March 12, 2011, the Nippon Paper Group established the Emergency Committee. Led by the president, the Committee coordinated efforts to confirm the safety of employees and to ensure that the Group continued to fulfill its responsibilities regarding the supply of products and services. On March 17, 2011, Nippon Paper Industries set up the Disaster Recovery Division. With the support of a great many people, the company was able to pursue reconstruction. Operations then recommenced in full at Ishinomaki Mill, the hardest hit of the three

production bases on August 30, 2012. In this section, we provide an Koinobori (colorful carp streamers) overview of the reconstruction process. made by local children (see page 10)

Note: A detailed report concerning the Great East Japan Earthquake is provided in the Sustainability Report 2011. http://www.nipponpapergroup.com/contents/200160367.pdf

Yoshio Haga, president of Removing wood Nippon Paper Group, Inc., waste and debris pledging his support for following the reconstruction efforts to the earthquake disaster mayor of Ishinomaki City For customers Reported on available supplies • and supply methods Secured alternative production • arrangements • Implemented various measures Initiatives in response to including the emergency import of newspaper paper from Group the earthquake disaster companies in the U.S.

Group employees helping in the distribution of emergency and relief supplies For disaster-hit areas Volunteer employees at work recovering Working hand-in-hand as a member of the local community to fishing gear bring about the reconstruction of affected areas • Pledged early reconstruction of the Ishinomaki Mill For employees • Removed earthquake debris, using wood waste as fuel • Supplied electric power to Tohoku Electric Power Co., Inc. and • Provided evacuation support and Tokyo Electric Power Co., Inc. guidance at the time of the Leased land for use as temporary housing earthquake disaster • • Delivered a wide range of emergency Supporting reconstruction as a corporate group and relief supplies • Contributed a total of ¥100 million to local municipalities in • Implemented a variety of measures Ishinomaki, Iwanuma, and Iwaki cities including initiatives aimed at Supplied essential daily items and 360,000 disposable diapers strengthening natural disaster • response capabilities • Implemented a bus service for volunteer workers.

The status of damage incurred by the Nippon Paper Group

Personal loss and suffering Property damage Nippon Paper Three mills and one branch (total aggregate While the Nippon Paper Group was forced to suspend operations Industries Co., Ltd. workforce; 1,409 employees) incurred damage as a at six mills as a result of the earthquake and subsequent tsunami, result of the earthquake and subsequent tsunami. all production facilities resumed operating in accordance with The safety of all employees, who were on duty at the plans. Brief details are presented as follows. time, was confirmed. It is with a deep sense of Nippon Paper Industries Nakoso Mill: May 2011 sorrow and regret that we report six employees lost Co., Ltd. Iwanuma Mill: May 2011 their lives outside working hours. Ishinomaki Mill: August 2012 NANKO UNYU Sadly, four employees lost their lives to the disaster. Nippon Daishowa Akita Mill: March 2011 CO., LTD. Paperboard Co., Ltd. Related and Regrettably, eight employees from related companies Kitakami Paper Co., Ltd. Ichinoseki Mill: March 2011 Partner Companies not included in the Group’s scope of consolidation, Companies as well as major partner companies, lost their lives. Daishowa Uniboard Co., Ltd. Miyagi Mill: April 2011

6 Nippon Paper Group Sustainability Report 2012 Playing a core role in further developing the regional economy Natsuo Fujisaki Managing Director and General Manager of the Ishinomaki Mill Nippon Paper Industries Co., Ltd. (formerly General Manager of the Disaster Recovery Division)

On March 12, 2011, the day after the earthquake struck six months after the earthquake disaster. Japan, the Emergency Committee was established within A further six months later, the mainstay Paper Machine the head office of Nippon Paper Group, Inc. At the same 6 resumed operations in March 2012. We were greatly time, the president of the Company declared a state of encouraged by local residents who commented that the emergency. Thereafter, the Disaster Recovery Division was water vapor rising from the stacks of the Mill was a source set up within Nippon Paper Industries on March 17, 2011 as of immense hope, helping to lift spirits and drive forward the a part of comprehensive efforts to ensure the resumption of region’s recovery. operations at damaged mills. I assumed the position of In June 2012, the Disaster Recovery Division was general manager of the Division determined to do my utmost disbanded and I assumed the position of Ishinomaki Mill until smiles returned to the faces all employees involved in general manager. Two months later at the end of August operations at each of the damaged mills. 2012, the Mill completed its full recovery according to plans. During a visit to the Ishinomaki Mill to inspect damage Looking ahead, we will cooperate with the city and on March 26, 2011, Yoshio Haga, president of Nippon prefecture to implement wide-ranging tsunami Paper Group, Inc., reconfirmed the Company’s intention to countermeasures including the construction of coastal reconstruct the Mill bringing cries of joy and relief to the levees and elevating roadways. We will continue to help Mill’s many employees as well as government agencies, promote recovery and reconstruction including the removal local residents and shopkeepers anxious about the future. I of rubble and supply of electric power. was struck with a strong sense of responsibility recognizing Learning from this recent disaster, we have focused on that the Mill’s reconstruction would lead directly to the putting in place enhanced natural disaster countermeasures region’s recovery. and reviewed our natural disaster manual. We will continue First, reconstruction required the removal of soil, sludge, to strengthen our endeavors to build a mill that is resilient to and rubble. Despite the tireless efforts of employees and natural disaster. support from related companies as well as personnel In addition, we will promote the effective use of new dispatched from other mills, the process took four months. construction materials made from granulated boiler ash and Working in unison while building on the collective pursue the application of materials sourced from the Tohoku strengths of various personnel from companies throughout region and Japan. Through these and other measures, we the Group, successful efforts were made to lift the pace of will strive to ensure mill operations that boast increased cost reconstruction with each passing day. Buoyed by these competitiveness and efficiency. endeavors, Paper Machine 8 was brought back into service

Yoshio Haga (third from the right), president of Nippon Paper Group, Inc., A morning meeting in front of the makeshift office where employees pledge inspecting damage at the Ishinomaki Mill on March 26, 2011 their utmost efforts prior to commencing the day’s work

Nippon Paper Group Sustainability Report 2012 7 REPORT Reconstruction following the Great East Japan Earthquake The path to reconstructing the Ishinomaki Mill Reconstruction timeline

2011 2012 March April May June July August September October November December January February March April May June July August

March 12 Established the Emergency Committee Commenced the Boilers online, supplying power to (Nippon Paper Group, Inc.) removal of rubble and Tohoku Electric Power Co., Inc. March 14 Commenced the receipt of emergency and debris from mill sites Commenced receipt of wood- relief supplies based debris March 19 Opened vacant Company housing facilities Paper Machine 8

The post-quake period Rubble and debris removal period

March 2011 — Period for securing a April to July 2011 — Period for removing platform that allows local residents to rubble and debris lead stable lives Reconstruction support teams were established at mills unaffected by The Ishinomaki Mill was completely submerged the earthquake disaster. At the same time, heavy machinery and underwater due to the tsunami. However, emergency operators were dispatched to commence clean-up activities. evacuation measures were implemented ensuring the Employees from the Ishinomaki Mill and partner companies combined safety of all employees working inside the Mill. Among a with members of reconstruction support teams to remove rubble variety of initiatives implemented in the wake of the and debris. disaster, steps were taken to deliver emergency and relief supplies and open vacant Company housing for use by displaced residents.

Employees evacuating the Mill Emergency and relief supplies The removal of rubble and debris using The removal of rubble and debris by hand delivered to the Ishinomaki Mill heavy machinery

Photographs tracing 3 Voice Placing the utmost emphasis reconstruction on safety and human life as an initial response Before reconstruction Takashi Sato Assistant Manager, General Affairs Dept. 1 Ishinomaki Mill Nippon Paper Industries Co., Ltd. 4 Immediately after the earthquake struck, radio broadcasts began warning about a tsunami that would be several meters high. We took prompt steps to evacuate the 1,306 employees working onsite. I immediately felt that this was going to be worse than any tsunami we had seen, so I insisted that everyone climb to higher ground. The mill-wide emergency broadcasting system proved invaluable. It meant that even after we lost electric power we were able to repeatedly broadcast evacuation orders. Undoubtedly, disaster preparation initiatives saved lives that day. Several of the 2 employees, who had evacuated to higher ground asked to return to the Mill to retrieve their mobile phones. Actions of this nature were strictly prohibited as a matter of course. Once the safety of staff had been secured through the evacuation of all employees, employees responsible for organizing the evacuation only just had time to scramble to safety themselves before, seconds later, the horrifying force of the tsunami hit the mill. Our urgent actions were successful. Every single mill employee was safe.

8 Nippon Paper Group Sustainability Report 2012 The Ishinomaki Mill, owned and operated by Nippon Paper Industries, took steps to secure a platform that would allow local residents to lead stable lives, remove rubble and debris, and restore facilities and equipment. On August 30, 2012, the Mill brought back online Paper Machine 6 and Coating Machine 2 in accordance with the Group’s Paper Business Revitalization Plan announced in August 2011.

Operations recommenced 2011 2012 March April May June July August September October November December January February March April May June July August

Completed reconstruction (August 30) Paper Machine N6 Paper Machine N4 Paper Machine N2 Coating Machine 4 Paper Machine N5 Paper Machine 7 (copier paper) Coating Machine 2

Facility restoration period

August 2011 to August 2012 — Period for bringing about facility recovery Toward mills that are In conjunction with the removal of rubble and debris, the Mill more resilient to took steps to ascertain the status of damage and to natural disasters undertake repairs. In August 2011, the Mill’s power source The Nippon Paper Group was restored. In the following month, production facilities reflected the lessons learned were brought back online in order of precedence. Thereafter, from the recent catastrophe all six paper machines and two coating machines into each of its mills disaster recommenced operations on August 30, 2012 according to plan. Production began anew with an annual capacity target response manuals. This of 850,000 tonnes. entailed incorporating Paper Machine 8 brought back into service practical drills more in tune to actual circumstances, promoting appropriate information disclosure methods during emergency situations, and putting in place evacuation and communication procedures.

Successful steps to bring about a full recovery at Operations resumed at Paper Machine N2 the Ishinomaki Mill

3 Helping in the start-up Voice of machinery After reconstruction throughout the Mill Noriaki Sato 1 Assistant Manager Section 1, Paper Machine 1 Nippon Paper Industries Co., Ltd. 4 After inspecting equipment and facilities following the earthquake, the first floor pump and electric power machinery powering Paper Machine 8 were submerged under water. In contrast, the main Paper Machine unit located on the second floor was spared any major damage. Under these circumstances, we felt that a resumption of operations was more than possible. With a strong sense of 2 mission, we focused on delivering printing paper to our publishing customers at the earliest possible opportunity. Restarting a paper making machine is a complex process, and sometimes problematic. It requires demanding skills and time to establish the flow of paper through the machine. However, that day the machine started perfectly and the paper flowed without a problem. It seemed like a miracle. There was now no doubt; we could make paper again in Ishinomaki. Hope had been reborn.

Nippon Paper Group Sustainability Report 2012 9 REPORT Reconstruction following the Great East Japan Earthquake

Comments from members of the local community

Working hand-in-hand to reconstruct the Ishinomaki region Hiroshi Kameyama Mayor, Ishinomaki City

Ishinomaki City suffered horrendous damage as a result of the provided encouragement to the 160,000 residents of the city. Great East Japan Earthquake. Houses and businesses near I am filled with awe and respect toward the efforts of all the coast suffered the severest damage from the tsunami. concerned at Nippon Paper Industries Co., Ltd., who Most tragic of all was the terrible loss of so many lives. brought about a complete recovery of the Mill in the very Despite these difficulties, the damage incurred to their short period of one year and six months. At the same time, I own equipment and facilities, and personal suffering, Nippon am convinced that the recovery of the mill would, in turn, Paper Industries Co., Ltd. and group companies have been lead to a strong recovery of the whole Ishinomaki area. selfless in providing their support and assistance in removing As a city, we have identified the fundamental principles of immense volumes of rubble. I would like to express my building a city that is resilient to disasters, revitalizing industry sincere appreciation for their efforts. and the regional economy, establishing a society that is defined Mr. Haga, president of Nippon Paper Group, Inc., was by its close ties and bonds forged through cooperation. Our quick to pledge the full reconstruction of the Ishinomaki Mill, goal is to serve as a reconstruction model for the rest of the owned and operated by Nippon Paper Industries Co., Ltd. At world. Working hand-in-hand with Nippon Paper Industries a time of deep anxiety and uncertainty, this commitment Co., Ltd. we will strive to realize a full recovery.

Expectations for the future Encouraged by the sight of koinobori (colorful carp streamers) Sueo Takagi Etsumi Saito Neighborhood Association Director Vice Principal Yoshiyama-cho Ishinomaki Kadonowaki Elementary School

The scene was unforgettable. After the earthquake I stood The Ishinomaki Mill came to us with the idea of making in my garden and stared in disbelief at what had been the enormous colorful carp streamers in an effort to provide office and the canteen I had often visited; now they were encouragement to the people of the region as they took just piles of debris. Rubbish was everywhere, with the the first steps toward rehabilitation and to promote the wreckage of people’s homes from outside the mill. healthy growth of children. Young children from all schools In the aftermath of the disaster, the Nippon Paper throughout the region threw themselves into the task. Group provided emergency and relief supplies, opened its Seeing these massive streamers blowing majestically facilities to local residents, and worked hand-in-hand to in the wind from the stacks of the Ishinomaki Mill bring about a recovery. More than anything else, however, impressed all of the children and local residents and the community was encouraged by the pledge to provided a wonderful source of encouragement. reconstruct the Mill. A great weight was lifted and anxieties allayed as we witnessed efforts to rebuild the facility. The completion of construction in less than a year and a half brought a significant ray of hope to the City of Ishinomaki. A key issue confronting Ishinomaki City in the wake of the earthquake is rising unemployment. My hope is that the continued growth and development of the Mill will help generate additional employment.

10 Nippon Paper Group Sustainability Report 2012 Voices responding gratefully to the support

Many people participated in and Hiromi Kurata supported efforts to reconstruct the Advisor Nippon Paper Industries Co., Ltd. Ishinomaki Mill (formerly senior managing director and general manager of the Ishinomaki Mill)

I would like to express my appreciation to all those who resumption of operations at the Mill, we received numerous provided their support in the reconstruction of the Mill. comments of encouragement from local residents. The Considerable supplies and donations were received following earthquake was undeniably a terrible experience, yet through the disaster. At the same time, I am extremely grateful to all the hardship I was able to experience things that were truly Mill employees as well as related and partners companies, moving, to see genuine appreciation for the help given, and who successfully brought about a complete recovery of the to witness the formation of deep ties between people. In Mill from what was virtually a hopeless position. The sight of overcoming hardships, I am convinced people working through the burning heat of summer and the that the more robust Ishinomaki Mill will bitter cold of winter, and never saying a word, will remain in continue to develop and grow in my mind and in my heart forever. partnership with the local community. The earthquake disaster again shone a light on the enormous strength and fortitude of people and the ability to Stickers made from paper produced at the Ishinomaki Mill. The design depicts overcome adversity. Supported by this power, I also take the character for “dreams” and the great pride in the Ishinomaki Mill. In working toward feelings of heartfelt thanks.

Passing on the baton of successful efforts to reconstruct the Mill and focusing on activities to Shinichi Sato Managing Director and General protect and enhance customer satisfaction. Manager Paper Sales Division Nippon Paper Industries Co., Ltd.

I would like to extend my sincere thanks to all customers The paper market in Japan continued to confront who provided their generous support and cooperation extremely harsh conditions. This is largely attributable to the following the recent earthquake disaster. lingering effects of the earthquake disaster and the Having incurred substantial damage to its facilities, prolonged slump in economic activity. Moving forward, we Nippon Paper Industries Co., Ltd. was forced to suspend will work toward overcoming this difficult environment by the monthly production and supply of 80,000 tonnes of delivering products to customers in a timely manner. R&D, printing paper. We were, however, able to minimize the Production, and Sales will work closely together to respond impact on customers and disruptions to supply by boosting quickly and effectively to customers’ needs. production at other mills in Japan and overseas as well as Nippon Paper Industries Co., Ltd. formulated its Paper directing products earmarked for export to the domestic Business Revitalization Plan, which included the reduction of market. production facilities, in August 2011. Looking ahead, we will After successfully bringing about a complete work closely with the Ishinomaki Mill to carry out the Plan. reconstruction of the Mill, the baton has now been passed We will continue working hard to increase the number of on to operating, sales, and marketing departments. It is now customers for whom we are the manufacturer of choice for the mission for these departments to carry on this effort their paper product needs. through to the delivery. I believe that the genuine revival of the Nippon Paper Group will only be achieved when this complete cycle is achieved.

Nippon Paper Group Sustainability Report 2012 11 Special Feature Building a Sustainable Future Activities undertaken as a comprehensive player in biomass businesses The Nippon Paper Group is actively engaged in the supply of a variety of products that use wood, a renewable resource, as a principal raw material, to society. In this Special Feature, we report on the Nippon Paper Group’s efforts to help build a sustainable society as a comprehensive player in biomass businesses while making the most of the inherent qualities of wood and forest resources.

Promoting sustainable forest Providing society with a variety resource procurement of products that utilize wood as a principal raw material Wood is a renewable resource. Unlike such exhaustible resources as oil and minerals, wood In addition to its lineup of mainstay paper, can be used on a continuous basis through paperboard, and household paper products, the proper forest management which entails planting, Nippon Paper Group provides a wide range of harvesting, and maintenance. paper container, wood and construction material, The Nippon Paper Group engages in as well as biochemical products. At the same sustainable forest resource procurement through time, the Group is promoting the supply of implementing a process of global supply chain biomass energy utilizing wood resources as a fuel. management that takes into consideration By employing the properties of wood in multi- environmental and societal concerns. On this faceted ways, the Nippon Paper Group is pursuing basis, the Group has adopted the Tree Farm further growth as a comprehensive player in Initiative as a part of its overseas afforestation biomass businesses (see pages 14 to 15). activities growing as many trees as are harvested each year (see page 59). Wood and construction materials Paper, paperboard, household paper products

Photosynthesis

CO2 CO2 CO2

CO2 absorption and sequestration Maintenance

Liquid packaging Afforestation Harvesting and others and use

Utilizing sustainable resources Energy After harvesting, steps are taken to regenerate forests through replanting as well as coppicing, which entails the growth of shoots that sprout from stumps into new trees. In this manner, every effort is being made to ensure a permanent source of forests. Biochemicals

12 Nippon Paper Group Sustainability Report 2012 Making the most of the inherent properties of wood and forests while helping to resolve wide-ranging issues in an effort to build a sustainable society

Preventing global warming, addressing the depletion of resources, and promoting biodiversity conservation are all key issues in building a sustainable society. In order to resolve these issues, the Nippon Paper Group is making the most of the outstanding properties of wood and forests.

Principal Characteristics of Initiatives of issues wood and forests the Nippon Paper Group

Preventing global CO2 absorption and sequestration CO2 sequestration totaling warming from the atmosphere approximately 40 million tonnes

Trees absorb and sequestrate CO2 from through the management of forests the atmosphere and are a major repository in Japan and overseas

of carbon. This carbon is retained even CO2 after trees have been processed into wood Company-owned forests in Japan CO2 Materials and used as construction materials and 90,000 hectares paper. In this manner, products derived Energy from forests and wood materials help Overseas afforestation areas reduce CO2 in the atmosphere and 163,000 hectares prevent global warming. 40 million tonnes of CO2 sequestration

Potential as an alternative to Non-fossil energy accounting for 45% fossil resources of energy consumed page 41 Wood is a renewable resource that can be increased through planting and cultivation. Non-fossil Addressing The use of wood as an alternative plastic energy* material to petrochemical products and the depletion 45% the application of construction material Fiscal Fossil energy of resources waste as well as lumber from tree thinning 2011 55% as non-fossil biomass fuels can also help * Non-fossil energy prevent resource depletion together with Includes biomass and global warming. waste material energy

Outstanding recycling properties Recycled paper utilization rate: paper 40%; paperboard 89% page 52 Paper products are well recognized for their recycling properties. In this context, Japan was quick to establish a mechanism to collect and utilize recycled Recycled paper Paper paper. Efforts to promote the effective use Paper 40% of resources contribute significantly to the board creation of a recycling-based society. Recycled paper 89%

Biodiversity conservation Protecting ecosystems Approximately 20% of Company- through forests owned forests in Japan maintained as In addition to preventing global warming environmental forest areas page 61 and protecting watersheds, forests possess a wide variety of functions while Mount Nikko providing shelter for diverse living creatures. Shirane in the In this context, the proper management Company-owned and cultivation of forests plays a major role Sugenuma Forest in in biodiversity conservation. Gunma Prefecture

Nippon Paper Group Sustainability Report 2012 13 Special Building a Sustainable Future Activities undertaken as a comprehensive player in biomass businesses Feature

Providing a variety of products driven by advanced knowledge and technologies while creating businesses that draw out the potential of wood resources

Lumber / Lumber sawing / Residences / processing construction materials furniture, other Wood

Paper, household Chip Kraft pulp Paper paper products, processing Chip processing Kraft pulp making Paper container packaging, other

Black liquor Energy (hemicellulose and (private power lignin) generation)

(Please refer to the following topics)

Apparel (rayon) / Sulfite pulping Dissolving pulp cellophane, other

Food additive, Refining Powdered cellulose filter aid, other

Concrete Lignin admixtures, other

Topics

Pioneered the manufacture of dissolving pulp in Japan using a kraft pulp continuous digester

Dissolving pulp is used as a raw material in the production Industry has in turn agreed to provide a subsidy for use of rayon. In recent years, demand for dissolving pulp has in meeting the expenses under its Innovation Center increased reflecting robust demand for rayon in China. Establishment Assistance Program: The Subsidy for In order to address this trend, Nippon Paper Industries Advanced Technology Demonstration and Evaluation Facility commenced trial production of dissolving pulp employing a Development (corporate demonstration/evaluation facility continuous digester using its kraft pulp production facilities development program). used to make paper. Looking ahead, In manufacturing dissolving pulp, a hydrolysis cooker annual production is newly introduced to the existing kraft pulp production will be expanded to process in order to extract hemicellulose. Adopting this kraft 30,000 tonnes on a pulp method in the manufacture of dissolving pulp helps progressive basis with ensure a higher level of cellulose purity. efforts directed toward This initiative represents the first time that dissolving cultivating new overseas pulp is being manufactured using a kraft pulp continuous markets that offer digester in Japan. The Ministry of Economy, Trade and substantial potential. A continuous digester

14 Nippon Paper Group Sustainability Report 2012 Taking steps to expand the application of paper-based products

Industrial Developing low environmental impact paper-based packaging materials materials field

The Nippon Paper Group is actively engaged in High Aluminum the development of new paper-based packaging Oxygen barrier foil materials for use in the food and related fields. Using property proprietary technologies, the Group is enhancing gas Packaging materials barrier properties through the use of special coatings. Plastic films under development By promoting alternatives to the films currently used in food and related packaging, the Group is increasing Low awareness and use of wood-based materials. Low Water vapor barrier property High

Actively promoting energy businesses in an effort to contribute to the Energy field stable supply of electric power

The Nippon Paper Group boasts Japan’s leading in-house power generation capacity, apart from power companies. The Group has considerable expertise in equipment operation at diversified power generating plants, actively using non-fossil energy, including wood- and waste-based fuels, which accounts for 45% of total energy consumption. Taking full advantage of these inherent strengths, the Nippon Paper Group is engaging in the supply and sale of electric power. The Group is now considering the introduction of biomass-fired thermal as well as photovoltaic and wind power generation plants. Nippon Paper Industries Co., Ltd. Fuji Mill

Promoting advanced applications of wood-based materials as an Biochemical field alternative to fossil resources

The Nippon Paper Group is promoting advanced applications of wood-based materials based on technologies developed through its business activities. For example, the Group holds high expectations for cellulose nanofiber, which has paper-like Film made light weight with steel-like strength, as an exterior protective from cellulose 300nm material for automobiles and so on. The Group anticipates uses nanofiber for compound technologies in a variety of materials including Cellulose nanofiber food packaging. The Group is reinforcing development activities in this field as well as working with universities and other companies to develop early commercialization.

Agricultural and food Expanding business in the seedling and functional food materials fields materials fields using the Group’s agri-bio technologies

In its agricultural and food materials business, the Group applies its proprietary technologies of cultivating cuttings in containers, researched and developed through afforestation, to support agriculture. The Group is facilitating volume production of plants considered difficult to nurture. The Group is also expanding activities in the functional food market through its high-value-added tea seedling business including the cultivation of Sunrouge having high Producing seedlings using proprietary anthocyanin content, a tea cultivar which helps reduce eyestrain. techniques for cultivating cuttings in containers

Nippon Paper Group Sustainability Report 2012 15 Outline of the Nippon Paper Group

Company Profile Name Nippon Paper Group, Inc. Group Companies (As of March 31, 2012) Address 1-2-2, Hitotsubashi, Chiyoda-ku, By Financial Statement Classification Tokyo, Japan Consolidated Non-consolidated Affiliates Capital ¥55.73 billion subsidiaries subsidiaries 48 91 48 Incorporation March 30, 2001 By Region Securities Tokyo Stock Exchange, Country / Japan USA Canada Australia Asia Europe Total Exchanges Osaka Securities Exchange, Region Consolidated Nagoya Stock Exchange 36 2 1 4 3 2 48 (Securities Code 3893) subsidiaries Equity- Telephone +81-3-6665-1000 method 7 1 1 1 0 2 12 affiliates

Major Financial Indicators Trends Consolidated Net Sales1 Consolidated Ordinary Income (Millions of yen) Pulp and Paper Division Paper-Related Division (Millions of yen) Housing and Construction Materials Division Other Division 80,000 1,500,000 60,000 1,211,682 1,188,136 1,200,000 77,286 85,126 1,095,233 1,099,817 1,042,436 40,000 37,547 82,099 79,186 69,136 32,800 31,599 70,064 70,564 102,125 92,647 53,588 56,605 17,944 900,000 88,567 94,335 60,675 20,000 93,469 6,057 0 600,000 2007 2008 2009 2010 2011 (FY) 950,171 940,297 873,890 879,740 817,726 300,000 Consolidated Net Income (Loss) 0 (Millions of yen) 2007 2008 2009 2010 2011 (FY) 45,000 30,050 Consolidated Operating Income1 30,000 15,000 (Millions of yen) Pulp and Paper Division Paper-Related Division 5,661 Housing and Construction Materials Division Other Division 0 60,000 -15,000 -30,000 -23,330 -24,172 43,149 -45,000 -41,675 4,298 2007 2008 2009 2010 2011 (FY) 40,000 590 35,608 36,524 32,834 4,211 2,426 3,113 5,801 1,922 2,490 2,337 8,044 6,684 4,321 19,951 Total Assets 20,000 4,034 1,078 34,047 (Millions of yen) 2,165 2,000,000 20,374 23,214 24,235 1,625,571 12,673 1,492,027 1,500,246 1,560,592 1,527,635 1,500,000 0 2007 2008 2009 2010 2011 (FY) 1,000,000 Employees (Consolidated)2 500,000 Pulp and Paper Division Paper-Related Division 0 Housing and Construction Materials Division Other Division 2007 2008 2009 2010 2011 (FY) Cross-Organizational3 20,000 Interest-Bearing Debt 15,000 14,210 13,834 13,666 13,088 230 13,407 (Millions of yen) 211 221 235 232 2,372 2,383 1,000,000 2,487 2,445 2,377 832,347 838,285 1,798 785,322 784,333 762,899 10,000 1,258 1,276 1,687 1,632 800,000 1,327 1,281 1,221 1,297 1,313 600,000 5,000 400,000 8,383 7,865 8,589 8,232 7,853 200,000 0 0 2007 2008 2009 2010 2011 (FY) 2007 2008 2009 2010 2011 (FY) 1 The Nippon Paper Group reclassified its business segments in FY2010. Figures up to FY2009 represent data for business segments prior to reclassification. 2 Fiscal year-end data 3 “Cross-organizational” means employees responsible for multiple divisions.

16 Nippon Paper Group Sustainability Report 2012 Business Details, Major Customers and Markets of the Nippon Paper Group (as of March 31, 2012)*

Pulp and Paper Division Paper Media Manufacture and sale of paper, Major Products Product Applications paperboard, household paper Newsprint, printing and publication Newspapers, books, products and pulp paper, business communication paper magazines, lea ets, and related products postcards, notebooks, Consolidated Subsidiaries printer paper, various Nippon Paper Industries Co., Ltd., Nippon Specialty paper (thin paper, paper slips Daishowa Paperboard Co., Ltd., Nippon high-performance paper) Paper Crecia Co., Ltd., Nippon Paper Papylia Linerboard and corrugating medium Principal Customers Co., Ltd., Kitakami Paper Co., Ltd., KOYO coated duplex board, tube and core The corporate sector including newspaper, PAPER MFG. CO., LTD., Daishowa North publishing, printing, stationary and related paperboard, packaging paper companies; the public sector including public America Corporation, Nippon Paper Industries Household paper products (facial USA Co., Ltd., NP Trading Co., Ltd., Kokuei agencies and ofces Paper Co., Ltd., Dyna Wave Holding Asia, tissue paper, bathroom tissue paper, SUN OAK CO., LTD., Paper Australia Pty. paper towels, diapers) Ltd, and seven other companies Paper Manufacturing Principal Customers Paper-Related Division Paper manufacturers Manufacture and sales of Major Products processed paper products and Liquid-packaging cartons and paper chemical products packaging containers Consolidated Subsidiaries Heavy duty bags (paper bags and Container and Packaging NIPPON PAPER-PAK CO., LTD., Nippon plastic bags) Product Applications Paper Chemicals Co., Ltd., Nippon Seitai Functional films Beverage containers, Corporation, FLOWRIC CO., LTD. and Dissolved pulp, functional chemical cardboard products, paper Sakurai Co., Ltd. products (sweeteners, seasonings, base boxes, envelopes, paper products for pharmaceuticals, paints) bags, wrapping paper Kitchen wraps Principal Customers Beverage manufacturers, manufacturers of a variety of paper processing products

Housing and Construction Materials Division Food and Chemical Products Procurement and sales of lumber; Product Applications Major Products / Business Paints, rayon bers, manufacture and sales of Housing and construction materials seasonings, pharmaceuticals construction materials, and; civil (beams, flooring, doors) Principal Customers engineering-related businesses Housing Manufacturers of beverages, Consolidated Subsidiaries Woodchips and recovered paper food, chemicals Nippon Paper Lumber Co., Ltd., South East Fiber Exports Pty. Ltd., NIPPON PAPER UNITEC CO., LTD., Kokusaku Kiko., Co., Ltd., PAL WOOD MATERIAL Housing and Construction Co., Ltd., PAL CO., LTD., N&E CO., LTD., Daishowa Uniboard Co., Ltd., Kunimoku Product Applications House Co., Ltd. and Nippon Paper Housing, furniture Ishinomaki Technology Co., Ltd. Principal Customers Construction materials, housing and construction Other Division companies, general consumers Beverage, leisure, warehousing and Major Products / Business transportation and electric power Printing Daily Necessity, supply businesses Beverages Food and Service Consolidated Subsidiaries Sports and leisure facilities Nippon Paper Development Co., Ltd., Insurance and leasing Principal Customers Graphic Arts Communication, NIPPON Real estate General consumers PAPER LOGISTICS CO., LTD., Kyokushin Transport Co., Ltd., NANKO UNYU CO., Greening and landscaping work LTD., Hotoku Co., Ltd., SHIKOKU Warehousing and transportation Civil Engineering COCA-COLA BOTTLING CO., LTD., Electric power supply SHIKOKU SAWAYAKA SERVICE CO., Principal Customers LTD., CANTEEN CO., LTD., SHIKOKU Administrative authorities COCA-COLA VENDING CO., LTD., SHIKOKU CUSTOMER SERVICE CO., LTD., SHIKOKU COCA-COLA PRODUCTS CO., LTD. and DYNAFLOW CO., LTD. Manufacturing * The four companies Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Co., Ltd., NIPPON PAPER-PAK CO., LTD., and Nippon Paper Principal Customers Chemicals Co., Ltd. merged on October 1, 2012 with Nippon Paper Manufacturing Industries Co., Ltd. as the surviving company.

Energy Principal Customers Utilities

Nippon Paper Group Sustainability Report 2012 17 Outline of the Nippon Paper Group

Major Operating Companies and Production Sites (As of October 1, 2012) Pulp and Paper Division Paper-Related Division Housing and Construction Materials Division Nippon Paper Industries Co., Ltd. Nippon Paper Industries Co., Ltd. 1 Kushiro Mill (Paper-Pak Division) PAL WOOD MATERIALS CO., LTD. 2 Asahikawa Works, Hokkaido Mill 1 SOKA PAPER-PAK CO., LTD. 1 PALTEC Co., Ltd. 3 Yufutsu Works, Hokkaido Mill 2 EGAWA PAPER-PAK CO., LTD. 2 N&E CO., LTD. 4 Shiraoi Works, Hokkaido Mill 3 MIKI PAPER-PAK CO., LTD. Daishowa Uniboard Co., Ltd. 4 ISHIOKA KAKO CO., LTD. 5 Ishinomaki Mill 3 Miyagi Mill 6 Iwanuma Mill 5 Nakoso Film Co., Ltd. 7 Nakoso Mill Nippon Paper Industries Co., Ltd. 8 Fuji Mill (Chemical Products Division) Other Division 9 Iwakuni Mill 6 Gotsu Works SHIKOKU COCA-COLA 10 Yatsushiro Mill 7 Iwakuni Works BOTTLING CO., LTD. 1 SHIKOKU COCA-COLA Nippon Paper Industries 8 Higashimatsuyama Works PRODUCTS CO., LTD. Co., Ltd. (Paperboard Division) 9 Yufutsu Works Komatsu No.2 Plant 11 Akita Mill Nippon Seitai Corporation 12 Soka Mill 10 Asahikawa Mill 13 Ashikaga Mill 11 Maebashi Mill 14 Yoshinaga Mill 12 Saitama Mill Location of Production Sites 15 Otake Mill 13 Niigata Mill Nippon Paper Crecia Co., Ltd. 14 Kyoto Mill 16 Tokyo Mill 15 Kyushu Mill 17 Kaisei Mill Akita Jujo Chemicals Co., Ltd. 18 Kyoto Mill 16 Head Office Plant 2 10 19 Koyo Mill 1 Nippon Paper Papylia Co., Ltd. 4 9 3 20 Harada Mill 21 Suita Mill 22 Kochi Mill 24 Kitakami Paper Co., Ltd. 23 Ichinoseki Mill Nippon Paper Industries USA Co., Ltd. 11 16 24 Port Angeles Mill 26 25 23 Paper Australia Pty. Ltd. 5 6 25 Maryvale Mill 3 26 Shoalhaven Mill 13

7 5

13 11 12 14 18 19 8 17 6 14 3 1121 1020 15 9 4 7 2 15 2 1 1 8 16 1 12 1222

10

18 Nippon Paper Group Sustainability Report 2012 Management Responsibility

Management Approach Information Disclosure and Investor Relations; Profit Distribution to Shareholders 26 Group Governance 20 Information Disclosure 26 Basic Stance 20 IR Activities 26 Corporate Governance Structure 20 Profit Distribution to Shareholders 27 Internal Control System 21 Evaluations by External Research and Ratings Agencies 27 Compensation Paid to Directors 21 Dialog with Stakeholders 28 CSR Management 22 Basic Stance 28 Basic Stance 22 The Use of Communication Tools 29 Management Structure 22 Major Press Releases 30 Collaborative Initiatives 23 Compliance 24 Basic Stance 24 Compliance Structure 24 Compliance Training 24 Group Internal Whistleblower System 25 Personal Information Protection 25 Respect for Intellectual Property 25

Nippon Paper Group Sustainability Report 2012 19 Management Responsibility Group Governance As a holding company responsible for the overall management of the Group, Nippon Paper Group, Inc. oversees and supervises the execution of business operations by Group companies.

Basic Stance in its external environment in recent years and to quickly allocate management resources to growth fields. With this initiative, the Striving to realize fair and highly transparent management Group will shift to a management structure that places Nippon Nippon Paper Group, Inc. strives for fair and highly transparent Paper Industries as the operating holding company of the Group. management to ensure the trust and meet the expectations of After the merger, Nippon Paper Industries will continue to monitor a diverse range of stakeholders. As a pure holding company, Group company activities and remain accountable to stakeholders. Nippon Paper Group, Inc. diligently oversees the activities of Moving forward, Nippon Paper Industries is considering the Group companies and works to enhance corporate value. The introduction of a new group management structure that separates Company recognizes that the fundamental tenet of corporate management functions from business execution, thereby governance rests in its accountability to stakeholders. continuing to strengthen corporate governance. Guided by this understanding, the Nippon Paper Group has continued to separate the Company’s management function from Corporate Governance Structure the execution of business operations since 2001, and to clarify the organization and its role. Nippon Paper Group, Inc. determines Our Group governance system is based on a board of the management policies and strategies of the Group as a whole directors and corporate auditors structure. and plays a pivotal role in promoting growth strategies. In this •Board of Directors context, we direct and guide Group companies while monitoring The Company’s Board of Directors comprised 10 internal (through audits and supervision) the execution of their directors as of April 1, 2012. It is responsible for determining business operations. the basic policies of the Company as well as Group companies, The Company has decided to merge with Nippon Paper deciding on matters pertaining to laws and regulations, Articles Industries Co., Ltd., the core operating company of the Group, of Incorporation, and other critical management issues, and on April 1, 2013 in an effort to better address significant changes monitoring the executive aspects of Group companies.

Corporate Governance Structure (As of April 1, 2012) General Meeting of Shareholders

Elect Elect Cooperate Elect

Board of Corporate Auditors Audit Board of Directors Audit (four members, including two outside auditors) (10 members) Independent Auditors

Supervise

Representative Directors

Cooperate Cooperate Group Management Committee

Internal Auditing Office

Cooperate

CSR Division CSR Department Compliance Office Corporate Lawyer Nippon Paper Group Corporate Monitoring Cooperate Auditor Liaison meeting auditing and ( supervising ) Cooperate

Group Consolidated Subsidiaries (business execution)

20 Nippon Paper Group Sustainability Report 2012 Management Responsibility Group Governance •Group Management Committee by the Company’s directors is consistent with applicable laws and The Group Management Committee is subordinate to the regulations, as well as its Articles of Incorporation. The Company Board of Directors and comprises all directors and standing is pressing forward with the construction of a system that ensures corporate auditors. It is responsible for deliberating on the basic the propriety of the Company’s operations. management policies and strategies of the Company and the WEB The full text of the Basic Policy for Establishment of the Internal Control System can be found on the following website. overall Group and on essential matters related to the business http://www.nipponpapergroup.com/e/news/ execution of Group companies. news06052602.pdf

•Board of Corporate Auditors •Internal control and reporting systems applicable to The Board of Corporate Auditors monitors the Company’s financial reports management. Two of the four auditors comprising Nippon Paper Group, Inc. took steps to fully address the internal the board are outside auditors responsible for ensuring and control reporting system requirements stipulated under the strengthening the board’s monitoring and auditing functions from Financial Instruments and Exchange Act of Japan, and to assess a third-party perspective. the development and ongoing operation of internal control Corporate auditors attend routine meetings including those systems with respect to the Group’s fiscal 2011 financial reports. conducted by the Board of Directors and Group Management This assessment covered the Group-wide internal control Committee to closely monitor the execution of duties by directors. systems of the Company and 23 consolidated subsidiaries. In addition to verifying that all Company operations are conducted Particular attention was paid to an evaluation of the business in an appropriate manner and are in compliance with statutory objectives of three major operating Group companies as they and regulatory requirements, corporate auditors offer their relate to net sales, accounts receivable and inventory operating opinions and comments to directors and employees. processes. This evaluation helped confirm the efficacy of the The Board of Corporate Auditors also coordinates closely with Group’s internal control and financial reporting systems as of the the auditors of Group companies to ensure that Group activities end of fiscal 2011. remain consistent with all laws and regulations and are conducted in an appropriate manner. The Nippon Paper Group Corporate Compensation Paid to Directors Auditor Liaison Meeting, which is composed of the standing corporate auditors of the Group’s 14 principal companies, Determined on the basis of roles, responsibilities holds meetings three times a year to provide a forum for the and performance constructive exchange of information. This encompasses details Compensation paid to directors is essentially composed of two of the Board of Corporate Auditors’ basic policies and priority parts. A fixed or base component of 70% is paid in relation to issues, as well as reports from the auditors of Group companies. each director’s responsibilities within the Group. The remaining Participating members consider and act upon all matters of 30% is in principle linked to the business results of the preceding concern as required. fiscal year. Directors who concurrently hold the position of director in a direct subsidiary are paid an additional amount in line with •Internal Auditing Office similar policies of each company. The Internal Auditing Office evaluates the internal audit and In view of their responsibilities, compensation paid to financial reporting control systems of each Group company. corporate auditors is limited to a fixed amount. This amount is Internal audits are conducted in a fair and independent determined through a process of deliberation by the auditors of manner. Particular emphasis is placed on legal compliance and each company. relevance of operations and activities. We evaluate the activities of The payment of compensation to directors and corporate Group companies and offer advice and recommendations as and auditors is also restricted to the total amounts approved at the when required, and are putting in place a system that will better general meetings of shareholders of each Group company. allow us to achieve our business objectives and management targets. While maintaining the integrity of our assets, we help Directors’ compensation to enhance corporate value. We are committed to ensuring the Officer class Maximum compensation payable sound and continuous development of the Group as a whole. Director ¥360 million per year

Internal Control System Corporate auditor ¥90 million per year Complying with statutory and regulatory requirements Nippon Paper Group, Inc. has established a highly effective internal control system in compliance with the Companies Act and its related regulations. It ensures that the execution of duties

Nippon Paper Group Sustainability Report 2012 21 Management Responsibility CSR Management As a framework for pursuing sustainable growth for the future to contribute to society through Group-wide business activities, the CSR Division executes corporate social responsibility initiatives and ensures compliance.

Basic Stance Management Structure Fulfilling our corporate social responsibilities in line with Overseeing corporate social responsibility through a the Group vision dedicated CSR Division The Nippon Paper Group has established the overarching vision As the holding company for the Group, Nippon Paper Group, Inc. of becoming a world-class corporate group. This vision is based established the CSR Division to oversee the CSR activities of the on the ideals of achieving superior, stable profits, winning the trust Group as a whole. The CSR Department and Public Relations of customers, having positive, forward-looking employees, and Office were set up within the CSR Division. The CSR Department preserving corporate ethics. While adhering strictly to a policy of promotes Group-wide CSR activities and works closely with the compliance, the Group works to achieve the vision. We work to various divisions and departments responsible for operations meet the expectations and requirements of stakeholders and fulfill relating to the environment, raw material procurement, product our corporate social responsibility from a variety of perspectives. safety as well as occupational safety and health. Placing the utmost emphasis on ongoing dialog with The Compliance Office serves as the facilitator and driving stakeholders, we will face up to the vast array of issues that force behind Group-wide efforts to ensure comprehensive continue to confront society from the broadest possible compliance. Through a variety of forums including Group perspective. On this basis, we engage in activities aimed at Compliance Liaison meetings, every effort is made to actively securing a sustainable society. interact with each Group company to enhance overall awareness toward compliance.

The Nippon Paper Group’s Action Charter (Formulated on April 1, 2004)

Vision

Nippon Paper Group will strive to become a world-class company though our diverse business activities. Ideals for Our Group I. Achieving superior, stable profits for our shareholders II. Winning the trust of our customers III. Having positive, forward-looking employees IV. Preserving corporate ethics

Action Charter

1. We shall pursue a sustainable growth for the future to contribute to society through our business activities. 2. We shall abide by the letter and the spirit of laws and regulations, and comply with the highest ethical standards and social codes of conduct, both in Japan and abroad. 3. We shall conduct our business in a fair, transparent and liberal manner. 4. We shall win the trust of customers through the development and provision of socially useful and safe products and services. 5. We shall disclose corporate information positively and fairly to all stakeholders of the Group. 6. We shall actively address environmental issues, and shall endeavor to conserve and enhance the environmental state of our planet. 7. We shall maintain consistency between corporate development and the personal contentment of individual employees, and create a company filled with dream and hope.

22 Nippon Paper Group Sustainability Report 2012 Management Responsibility CSR Management Collaborative Initiatives and anti-corruption. Signatories to the compact voluntarily pledge to practice the 10 principles outlined in the Global Compact, Participating in industry and trade associations and aiming at the sustainable growth of society. advisory organizations in Japan and overseas Nippon Paper Group, Inc. announced its decision to support The Nippon Paper Group places harmony between economy, the aforementioned 10 principles and joined as a signatory in environment and society at the heart of its business activities. November 2004. In addition to engaging in CSR management We particularly endeavor to build sincere codependent activities that run parallel to the 10 relationships with stakeholders by coordinating with other principles, we continue to share companies and organizations, and joining a variety of information with other companies, associations with the goals of promoting economic development international organizations, in Japan and overseas and realizing a sustainable society. government agencies, global labor and NGOs. Working hand in hand •The United Nations Global Compact with a wide range or organizations, The United Nations Global Compact is an initiative put forward by we contribute to a number Kofi Annan in 1999 when serving as United Nations Secretary- of activities. General Kofi Annan. The initiative identifies 10 principles covering WEB Global Compact Network Japan the four fields of human rights, labor standards, the environment http://www.ungcjn.org/ (Japanese only)

Major Organizations with which the Nippon Paper Group Has an Affiliation (As of April 1, 2012) Organization Overview of the Organization and Its Activities The Nippon Paper Group wholeheartedly supports the 10 principles of the compact, covering human The United Nations Global Compact rights, labor standards, the environment and anti-corruption. Every effort is made to voluntarily advance each cause. ICFPA is made up of 43 forest and paper industry associations from 40 countries and regions. The International Council of Forest and council serves as a forum that promotes dialog, interaction, and cooperation. The Company’s Paper Association (ICFPA) 1 participation in ICFPA is through its membership in the Japan Paper Association. Global Amnesty International is a global movement whose vision is for every person including those in Japan Amnesty International Japan to enjoy all the rights enshrined in the Universal Declaration of Human Rights and other international human rights laws and standards. The World Wide Fund for Nature Japan is a member of the World Wide Fund for Nature, the world’s WWF Japan 2 largest nature conservation NGO. It engages in a wide range of activities aimed at protecting the natural environment worldwide. The Japan Paper Association is a paper and pulp manufacturing industry organization composed of Japan Paper Association 3 major paper companies whose goal is to promote sound industry growth. Keidanren (Japan Business An all-encompassing business organization whose mission is to transform Japan’s economy into one Federation) that is sustainable and driven by the private sector. Council for Better Corporate With the full backing of Keidanren, CBCC supports the activities of Japanese companies overseas as Citizenship (CBCC) good corporate citizens. Serving as an industry association, JHPIA is comprised of the following five industry organizations: the Japan Hygiene Materials Industry Association, the Japan Hygiene Paper Industry Association, the Japan Hygiene Products Industry Japan First Aid Bandage Industry Association, the Japan Cleansing Wipes Industry Association, and Association (JHPIA) 4 the Japan Face Mask Industry Association. The Association strives to resolve issues common throughout the industry in an effort to enhance the quality of civilian life, health and hygiene. The Japan Soft Drink Association is an incorporated entity under the control of Japan’s Ministry of Agriculture, Forestry and Fisheries. The association takes steps to develop the cold beverage industry Japan Japan Soft Drink Association 5 in tune with the public’s interest, enhance product quality and safety, and promote a greater awareness toward healthy consumption. The committee is composed of related associations in the dairy, container manufacturing, and other Committee for Milk Container sectors. Focusing on issues relating to the environment, the committee engages in the collection and Environmental Issues 6 recycling of milk and other beverage containers as well as educational activities designed to promote environmental awareness. The Japan Association of Milk Packaging and Machinery is a special corporation established under the Civil Code by Japan’s Ministry of Health, Labour and Welfare. Comprised of packaging container Japan Association of Milk Packaging and machinery manufacturers, the association is active in the advancement of milk and other and Machinery 6 beverage container, packaging, and manufacturing equipment with a particular focus on improving safety and hygiene. The Wild Bird Society of Japan is a membership-based public interest corporation. Its purpose is to Wild Bird Society of Japan 2 protect wild animals and their habitats with a particular emphasis on birdlife. 1 The Company’s participation is through the Japan Paper Association, representing Japan as a member of ICFPA. 2 Group operating company Nippon Paper Industries is a member. 3 Nippon Paper Industries, Nippon Daishowa Paperboard, Nippon Paper Papylia, and Kitakami Paper are members. 4 Group operating company Nippon Paper Crecia is a member. 5 Group operating company SHIKOKU COCA-COLA BOTTLING Company is a member. 6 Group operating company NIPPON PAPER-PAK is a member.

Nippon Paper Group Sustainability Report 2012 23 Management Responsibility Compliance As a committed partner ensuring that employees are fully informed about compliance, the Nippon Paper Group engages in corporate activities in accordance with laws and social norms.

Basic Stance Compliance Training Promoting compliance in accordance with the Group’s Educating the workforce to raise the awareness Action Charter of compliance In its Action Charter (see page 22) formulated in 2004, the Nippon In addition to being constituent members of the Group, our Paper Group declared its commitment to abiding by the letter and employees are consumers and members of society. In this regard, the spirit of laws and regulations and complying with the highest each and every employee must ensure that his or her mindset ethical standards and social codes of conduct both in Japan and is consistent with societal norms. By adjusting the Company’s abroad. To meet this commitment, the Group diligently upgrades actions to align with this premise, we are taking the first steps and expands its compliance structure while implementing toward reforming our corporate culture. measures to enhance thoroughgoing compliance awareness, Education and training implemented by the CSR Division such as through continuous training programs. conveys the importance of compliance while enhancing employee awareness and creating a sustainability culture Group-wide. Compliance Structure Implementing compliance training Positioning the CSR Division at the heart of Group-wide compliance efforts Nippon Paper Group, Inc. conducts compliance training The Nippon Paper Group established the CSR Division in June on an ongoing basis to further enhance awareness 2008 to play a pivotal role in fulfilling corporate social responsibility. and understanding among employees of the Group The Company’s Compliance Office was repositioned within the (consolidated and production subsidiaries in Japan). newly established CSR Division. We have invited a consultant from outside the The CSR Division serves as a facilitator and driving force Group to augment our compliance programs and are behind efforts to achieve the two major compliance-related goals conducting practical training focusing on compliance and of imbuing the Group with zero tolerance of misconduct and risk management. Training is geared toward enhancing transforming the corporate structure and culture. The division employees’ abilities to identify potential compliance also spearheads activities aimed at promoting strict compliance issues and risks in the workplace. Our hands-on nature throughout the entire Group. of training programs extend to workshop discussions that are designed to provide employees with the basic skills •Promoting Group-wide compliance required to address these risks. The Compliance Office acts as a central contact point for Looking ahead, we will continue to implement promoting and coordinating compliance activities at each compliance training to ensure a heightened sense of Group company. awareness and strict adherence throughout the Group. Each Group company has appointed a compliance manager. The Compliance Office holds Group Compliance Liaison Meetings to provide all compliance managers with details of compliance policies and initiatives. In addition to serving as a forum through which compliance information can be shared among Group companies, these meetings act as an avenue to provide advice on education and training activities. Through these and other means, we are making every effort to promote Group-wide compliance. Compliance training

24 Nippon Paper Group Sustainability Report 2012 Management Responsibility Compliance Group Internal Whistleblower System Personal Information Protection Encouraging reporting via a help-line on activity in conflict Ensuring protection of personal information through with compliance systematic rules and enhanced handling procedures The Nippon Paper Group established the Help Line System on The Nippon Paper Group has taken steps to clearly identify April 1, 2004. The system allows any employee of the Group to the structure and rules applicable to the handling of personal notify directly or consult outside the chain-of-command structure information. A manual, distributed to each operating company, on any action in the workplace that could violate laws, social forms the basis for appropriately handling the personal information norms or corporate ethics. The Compliance Office located within of customers, business partners and employees. the CSR Department serves as a point of contact within the Nippon Paper Industries drew up the Rules on the Handling Group. We have also taken steps to establish points of contact of Personal Information on April 1, 2006. A copy of these rules outside the Group for use by employees as appropriate. and the aforementioned manual are distributed to all directors The Help Line System guarantees the privacy of whistleblowers and employees. Details are also posted on the Group’s intranet to and protects them from any disadvantageous treatment after further ensure strict adherence. In the lead up to the establishment notification or consultation. The system also ensures that of the Rules and manual, Nippon Paper Industries, conducted a appropriate action is taken to address all issues raised at an review of the personal information held by individual departments early stage. A detailed explanation of the Help Line System is an since fiscal 2005. Details of the date personal information were integral component of the Group’s compliance training. This is obtained and its use are recorded and managed in a control designed to ensure that the system is used to maximum effect. ledger. This ledger is reviewed annually to eliminate unnecessary data and to ensure that information is handled properly. Trends in the number of notifications received by the Help Line* Fiscal 2008 Fiscal 2009 Fiscal 2010 Fiscal 2011 Respect for Intellectual Property 16 24 11 15 * The Help Line is open to members of the Nippon Paper Group (consolidated Heightening respect for intellectual property and ensuring and production subsidiaries in Japan) compliance with all applicable laws The Nippon Paper Group places the utmost importance on Flow of the Help Line System intellectual property not only in research and development,

User but also in all of its business activities. In order to instill an Group company employees, temporary workers, contract workers, appreciation of the value of intellectual property and to promote dispatched staff, factory workers from contractors, etc. strict adherence to all applicable laws and regulations, members of the Intellectual Property Department of Nippon Paper Industries Noti cation/consultation Response conduct lectures and intellectual property education programs for Noti cation/consultation the benefit of Group company employees. Response External Point of Contact Since intellectual property education was first initiated

Company specializing in in fiscal 2002, the content of programs has expanded and Legal of ce telephone counseling improved each year. Today, Nippon Paper Group engineers and administrative employees are exposed to a wide variety of Noti cation/consultation Response material commensurate with their years of service and duties. Programs encompass details of all relevant laws including

Internal Point of Contact the Patent Law, the Utility Model Law, the Design Law, the

CSR Department Trademark Law, the Unfair Competition Prevention Law and the Compliance Of ce Copyright Law. In addition to providing pertinent information on

Coordination the relationship between the Company and the aforementioned laws, these programs identify areas requiring particular care from Consolidated Subsidiaries a compliance perspective. A total of 350 employees attended the Of cers in charge of compliance 14 programs implemented in fiscal 2011.

Nippon Paper Group Sustainability Report 2012 25 Management Responsibility Information Disclosure and Investor Relations; Profit Distribution to Shareholders The Nippon Paper Group is dedicated to promoting mutual understanding with its shareholders and investors. With a focus on dialog, we are conducting a variety of presentations and events.

Information Disclosure Information Disclosure Structure and Framework Press releases, Newspapers, TV, Addressing the interests of stakeholders and ensuring interviews magazines, websites Media transparent management through active information Public Relations disclosure Website Of ce and Society The Nippon Paper Group recognizes that open and fair Corporate Planning Dept. disclosure to a broad stakeholder base is a key responsibility of Shareholders Presentations, interviews Analysts management. In this regard, we work diligently to engage in sound Institutional and highly transparent management by disclosing company investors information in accordance with our Action Charter (see page 22). To guide us in our endeavors, we formulated the Nippon Paper IR Activities Group Disclosure Policy in October 2005. Following the guidelines of this basic policy, we comply with Promoting dialogue with shareholders and investors the provisions of the Financial Instruments and Exchange Act of The Nippon Paper Group expends considerable time and effort Japan and other relevant laws and regulations. We also adhere to in providing to its shareholders and investors a direct explanation the prompt disclosure rules stipulated by securities exchanges, of the status of the Group’s management and business. At the and disclose information in a timely manner, standing on the same time, we take steps to obtain the comments and concerns principles of transparency, fairness and continuity. Furthermore, of shareholders and investors incorporating our findings into we disclose information that may not be required under applicable ongoing management. laws, regulations, or prompt disclosure rules, when deemed to be of interest to our stakeholders and other members of society. Results of activities in fiscal 2011 Information Disclosure Policy WEB Operating results and management briefings One time http://www.nipponpapergroup.com/e/ir/policy.html Teleconference Two times Meetings with management 41 times The Nippon Paper Information Disclosure Policy (Excerpt) Individual interviews 285 times

1. Basic Disclosure Stance The Nippon Paper Group (the Group) pursues a •Shareholders’ meeting fundamental policy of disclosing corporate In an effort to ensure attendance by as many shareholders as information proactively and fairly to all Group possible, Nippon Paper Group, Inc. has held its annual stakeholders, and raising the level of management general meeting of shareholders at Tosho Hall in Marunouchi, transparency in accordance with its Action Charter Tokyo, since the Company’s inception in fiscal 2001. Easily and Codes of Conduct. accessible, this venue has been chosen to enhance the convenience of shareholders. 2. Criteria for Disclosure For the benefit of overseas investors, Nippon Paper Group, (1)  The Group conducts expeditious disclosure based Inc. has contracted the services of specialist companies to on the principles of transparency, fairness and prepare an English-language convocation notice. In addition consistency, in line with the Japanese Corporate to the exercise of voting rights in writing, the Company has Law, Securities and Exchange Law1 and other also established a service that allows shareholders to exercise relevant laws, as well as the Rules on Timely their rights online. Through these and other measures, we Disclosure of Corporate Information by Issuer of are endeavoring to promote the exercise of voting rights by Listed Security (the Rules on Timely Disclosure) shareholders both in Japan and overseas. stipulated by securities exchanges2. (2) Even for information that does not fall under •Operating results and management briefings the categories stipulated in the relevant laws Regular operating results and management briefings are held for and the Rules on Timely Disclosure, the Group the benefit of institutional investors and analysts. Each briefing is carries out rapid and accurate disclosure of attended by close to 200 people, who are provided with operating information useful to stakeholders and results details, management the broader society, to the fullest extent possible, thoughts on the immediate and regardless of any advantages or disadvantages future business environments as well that may accrue to the Group as a result of such as issues confronting management, information disclosure. and an overseas of medium- to Operating results briefing long-term management strategies. 1 Currently the Financial Instruments and Exchange Law 2 Currently the financial instruments exchange

26 Nippon Paper Group Sustainability Report 2012 Management Responsibility Information Disclosure and Investor Relations; ProfitDistribution toShareholders

•Meetings with management Profit Distribution to Shareholders In addition to the aforementioned briefings, Nippon Paper Group, Inc. convenes meetings attended by the Company’s management. Nippon Paper Group, Inc. is committed to the continuous Not only do these meetings provide a forum for direct distribution of profits to shareholders based on the steady dialog, they also help deepen the understanding of institutional payment of cash dividends. investors in the Company’s strategies and management stance Nippon Paper Group, Inc. strives to reinforce its management while providing management with the opportunity to listen to the base, improve profitability and secure the sustainable growth of its comments and concerns of the market. corporate value, thus fulfilling the expectations of shareholders. Our basic dividend distribution policy is based on a •Individual interviews comprehensive assessment of the Group’s performance as well as With the exception of quiet or closed periods, the Company efforts to boost retained earnings. With this as a guide, we endeavor responds positively to requests for interviews from institutional to provide a stable stream of cash dividend payments investors and analysts throughout the year. Cognizant of whenever possible. maintaining fairness in the provision of information, significant care is taken to provide details of the Company’s operating results, Trends in Dividends per Share (Yen) performance forecasts and management initiatives in a candid March March March March March and precise manner. 2008 2009 2010 2011 2012 Interim Dividend 4,000 4,000 40 40 10 Tours and other events Period-End • 4,000 40* 40 20 20 In order to promote a deeper understanding of the Nippon Dividend

Paper Group and its activities, every opportunity is taken to Note: A 100-to-1 stock split was conducted on January 4, 2009, with trading arrange factory and other tours each year. The tour of Nippon lots introduced with one lot consisting of 100 shares. Paper Industries’ Iwanuma Mill in fiscal 2011 and the company’s R&D Department in fiscal 2012 attracted considerable praise Evaluations by External Research and from participants. Ratings Agencies The Company has received evaluations from the following external agencies. •Debt ratings Listed below are the major debt ratings of Nippon Paper Group, Inc.

The status of major debt ratings (As of September 30, 2012) Ratings Agency Rating A tour of Nippon Paper Industries’ R&D Dept. Rating and Investment Information, Inc. (R&I) Long-term bonds: A– Japan Credit Rating Agency, Ltd. (JCR) Long-term bonds: A+ •IR tools and websites The Nippon Paper Group uses various websites to disclose IR •Evaluation from SRI research/rating agencies information. In addition to copies of news releases, the Group’s IR Recently, socially responsible investment (SRI), an approach that websites provide an array of information, including presentations evaluates a company from a wide range of social perspectives, and briefings, as well as summaries of consolidated financial has become increasingly familiar both in Japan and abroad. results. Moving forward, the Group will continue to bolster and In addition to the profit and financial standing of a company, expand the content of IR information. SRI concerns therefore play an important role in selecting an WEB Annual Reports investment. Nippon Paper Group, Inc. has been included in the Application form: http://www.nipponpapergroup.com/e/ following SRI indices. appliform/index.html PDF version: http://www.nipponpapergroup.com/e/ir/ annual.html Major SRI indices that include Nippon Paper Group, Inc. (As of September 30, 2012)

Japan Morningstar SRI Index

Nippon Paper Group Sustainability Report 2012 27 Management Responsibility Dialog with Stakeholders In addition to daily communication, we are actively promoting opportunities for dialog.

Basic Stance CSR management. In this context, we actively establish contact points and Actively promoting dialog opportunities for direct dialog with all stakeholders while providing The Nippon Paper Group maintains relationships with a broad daily information and promoting the exchange of opinions. By spectrum of stakeholders including employees, customers, disclosing relevant information and listening carefully to the society and local residents in the conduct of its business. The concerns of stakeholders, we will work diligently to secure Group places the utmost importance on communication with sustainable growth and development both for the Group and stakeholders, incorporating their comments and requests into its society as a whole. decision-making process when carrying out business and

Contact points that allow dialog with stakeholders Stakeholder Major point of contact Means of communication

Employees (executives, permanent employees, part-time employees, employee families) The approximate 13,400 employees (consolidated basis) of the Nippon Paper Group are responsible for business and CSR activities. Working closely with the labor union, the principal Labor–management mouthpiece for the Group’s employees, we make every effort to ensure that our employee Human resource councils, labor– evaluation and compensation systems are fair and equitable, and to provide a rewarding and sections management comfortable workplace. In addition, we provide a variety of benefits, including medical committees, etc. examinations covering employees and their dependents in an effort to foster peace of mind and garner the trust of employee families.

Customers (consumers, end users, etc.) Paper, the Nippon Paper Group’s principal product, is widely used by both companies and Sales sections individuals. Paper products are for the most part delivered directly to the corporate sector and Individual interviews, Quality control sections wholesale trading companies, printing companies and publishers in Japan. In addition, household inquiry to the customer Customer relations paper and leisure services are provided to individual customers (consumers). We are putting in relations sections, etc. sections place the necessary structures and systems by product and service that best address the needs of customers.

Environmental explanatory meeting, risk communication, Mills and works Society and local residents (local communities, NPOs/NGOs, municipalities, the media, etc.) environmental monitoring The Nippon Paper Group maintains the majority of its production bases in Japan. Recognizing that system, factory and other our business activities have a major impact on surrounding communities, we place significant presentation meetings, etc. weight on promoting harmonious co-existence with local residents, protecting the natural environment and garnering the trust of society. We are also acutely aware that the activities of Responsible sections NPOs and NGOs, both in and outside Japan, reflect the interests and concerns of society. Through within each business Interviews, etc. dialog and support, we are working to foster deeper mutual understanding. Moreover, we segment acknowledge the importance of the media in ensuring accountability to the broader society. In this Social contribution Social contribution regard, we are actively engaged in information disclosure. sections activities, etc.

Public relations Press releases, sections interviews, etc.

Business partners (agents, suppliers, subcontractors, etc.) While the majority of business partners are companies domiciled in Japan, items such as woodchips and energy are mainly procured from overseas suppliers. Moving forward, relationships Material procurement with business partners are expected to increasingly take on a global nature. As important partners sections Individual interviews, etc. in the overall conduct of its business activities, the Nippon Paper Group engages in open and fair Human resource trading transactions while promoting positive relations with its business partners. In an effort to sections engender in our customers a strong sense of trust, we work closely with business partners to promote CSR activities throughout the supply chain.

General shareholders’ Shareholders (shareholders, investors, etc.) meetings, explanatory Shares of Nippon Paper Group, Inc. are listed on the Tokyo, Osaka and Nagoya securities meetings, annual reports, IR sections exchanges. Financial institutions and foreign investors held 49% and 16%, respectively of the business reports, interim General affairs sections 116,250,000 shares issued by the Company as of March 31, 2012. Nippon Paper Group, Inc. reports, IR site, IR strives to disclose information in a timely, transparent, fair and continuous manner. information mail, teleconferences, etc.

28 Nippon Paper Group Sustainability Report 2012 Management Responsibility Dialog with Stakeholders The Use of Communication Tools The Nippon Paper Group Sustainability Report 2011 Wins Two Outstanding Achievement Awards. Actively and continuously disclosing information Striving to inform stakeholders about its wide-ranging activities, The Nippon Paper Group Sustainability Report 2011 issued the Nippon Paper Group uses a variety of communication tools to by Nippon Paper Group, Inc. in October 2011 received disseminate corporate information. Through these means, we are the outstanding achievement award in the green reporting actively working to stimulate dialog. category of the 15th Environmental Communication Awards1 as well as the 15th Green Reporting Awards2. These awards are referred to as the “twin jewels” and represent the pinnacle of sustainability reporting in Japan. The Sustainability Report is a core tool through which the Nippon Paper Group conveys details of its CSR- oriented activities to all stakeholders. These awards reflect the significant esteem in which the daily efforts of Group employees are held.

Corporate Group Annual Sustainability Profile communication Report Report magazine Dynawave

Sustainability Report The 15th Environmental Communication 2011 and Green Reporting awards ceremony 1 The Environment Communication Awards sponsored by Japan’s Ministry of the Environment and the Global Environmental Forum 2 The Green Reporting Awards sponsored by Toyo Keizai Inc. and the Green Reporting Forum

WEB Website http://www.nipponpapergroup.com/e/csr/

Major Communication Tools Tool Published By Description Main Targeted Readers Detailed explanation of the Group’s CSR Sustainability report Nippon Paper Group activities All stakeholders Environmental and social communication Easy-to-read explanation of magazine ShikiOriori Nippon Paper Group the Group’s CSR activities All stakeholders Corporate profile Individual companies Overview of each company All stakeholders Easy-to-read introduction to Employees and their families, Group communication magazine Dynawave Nippon Paper Group the Group’s activities business partners Individual companies Easy-to-read introduction to the activities of In-house and mill magazines and mills each company and mill Employees and their families Corporate profile for job applicants Individual companies Explanation and overview of each company Job applicants Detailed explanation of the Group’s operating Individual investors, institutional Annual report Nippon Paper Group results and financial standing investors, securities analysts Easy-to-read explanation of the Group’s Business report Nippon Paper Group operating results and financial standing Shareholders Comprehensive presentation of information Internet website Individual companies relating to the business of each company All stakeholders Individual investors, institutional IR information mailings Nippon Paper Group IR information investors, securities analysts

Nippon Paper Group Sustainability Report 2012 29 Major Press Releases Distributing a wide range of corporate information through such media as the Internet

Major press releases in Japan and the related pages in the 2012 sustainability report The Environment and Society Earthquake Management, Investment, New Products, etc. 2H Fiscal •November 30 Nippon Paper Industries Co., •November 1 Nippon Paper Group, Inc. 2011 Ltd. Nippon Paper Group, Inc. establishes the Energy October First woodchip carrier enters pier 1 of Business Promotion Office (see page 15) (Nippon Minamihama at Port of Ishinomaki Paper Group implements a change in its after earthquake organization incorporating the Energy Business Promotion Office into the Energy Business Department on July 1, 2012) •December 14 Nippon Paper Group, Inc. •December 1 Nippon Paper Chemicals Co., Ltd. Nippon Paper Group formulates Green Nippon Paper Chemicals completes Machine Action Plan 2015 (see page 32) No. 3 at Gotsu Mill •December 7 Nippon Paper Chemicals Co., Ltd. Nippon Paper Chemicals completes installation of No. 6 Coater at Higashimatusyama Mill January •January 31 Nippon Paper Group, Inc. Nippon Paper Group Sustainability Report 2011 receives Outstanding Achievement Award for green reporting (see page 29) •March 9 Nippon Paper Industries Co., Ltd. •March 7 Nippon Paper Papylia Co., Ltd. Paper Machine N6 operations recommence Nippon Paper Papylia launches new thermal at the Ishinomaki Mill (see page 9) water-soluble paper •March 2 Nippon Paper Group, Inc. Nippon Paper Group Sustainability Report 2011 receives Outstanding Achievement Award in 15th Environmental Communications Award (see page 29) 1H Fiscal •April 2 SHIKOKU COCA-COLA •April 12 Nippon Paper Industries Co., Ltd. 2012 BOTTLING CO., LTD. Nippon Paper Industries launches new b7 BULKY April SHIKOKU COCA-COLA BOTTLING CO., product developed at Ishinomaki Mill (see page 71) LTD. launches the “Happy Shikoku” Project •April 25 Nippon Paper Group, Inc. (see page 99) Notification of entry into a merger agreement with consolidated subsidiary Nippon Paper Industries, and a merger agreement among four consolidated subsidiaries •May 17 Nippon Paper Group, Inc. Nippon Paper Industries submits notification as a Power Producer and Supplier (PPS: Specified- Scale Electricity Utility) •May 23 Nippon Paper Group, Inc. Nippon Paper Group develops Fourth Medium- Term Business Plan (FY2012-FY2014) •June 12 Nippon Paper Group, Inc. Nippon Paper Group announces joint venture with SCG Paper in Thailand for machine glazed paper July •August 30 Nippon Paper Industries Co., Ltd. •August 22 Nippon Paper Industries Co., Ltd. Nippon Paper Industries completes Nippon Paper Industries establishes production reconstruction of the Ishinomaki Mill system for kraft paper at Kushiro Mill (see page 9) (see page 14) •September 11 Nippon Paper Group, Inc. Nippon Paper Group holds the 13th Marunuma Kogen School of Friendship for Forests and Paper (see page 97) WEB Press Releases Note: Posted in the “Information” WEB Information http://www.nipponpapergroup.com/e/ section of the Company’s website http://www.nipponpapergroup.com/ index.html e/info/index.html

30 Nippon Paper Group Sustainability Report 2012 Environmental Responsibility

Management Approach Biodiversity Conservation 44 Basic Stance 44 Policy and Management 32 Overview of Biodiversity Conservation Activities 44

Basic Stance 32 Enhancing Awareness toward the Importance of Charter on the Environment 32 Biodiversity Both within and outside the Group 44 Environmental Action Plan (Green Action Plan) 32 Initiatives Implemented in the Conduct of

Environmental Management Promotion Structure 34 Our Core Business Activities 45 Strengthening Environmental Compliance 34 Initiatives that Harness Company-Owned Resources and Technologies 46 Breaches of Statutory Requirements and the Status of Accidents 35 Reducing Waste Generation and Final Disposal 48

Environmental Communication 36 Reducing Final Waste Disposal 48

Environmental Education and Training 36 Promoting Proper Waste Management 48

Environmental Accounting 37 Effectively Utilizing Waste 48 Material Balance 38 Initiatives to Prevent Environmental Pollution 49

Material Balance 38 Preventing Air Pollution 49 Efforts with regard to Issues Preventing Water Pollution 49 Preventing Noise, Vibration, and Foul Odors 50

Mitigation of Climate Change 40 Preventing Soil Pollution 50 Objectives and Initiatives Regarding Global Warming Prevention 40 Controlling Chemical Substances 50 Reducing the Use of Fossil Fuels 40 Promotion of Recycled Paper Use 52 Fuel Conversion through the Effective Use of Waste 40 Basic Stance 52 Fiscal 2011 Results 41 Recycled Paper Utilization Rate 52 Logistics-Related Initiatives 42 Carbon Sequestration 43 Preventing Global Warming through the Use of Trees 43

Nippon Paper Group Sustainability Report 2012 31 Environmental Responsibility Policy and Management We are putting in place a Group-wide environmental management system based on our Charter on the Environment and engaging in environmentally friendly corporate activities.

Basic Stance Environmental Action Plan (Green Action Plan) Endeavoring to reduce the environmental impact of our In identifying concrete actions and specific objectives, we activities taking into consideration the unique characteristics are working to raise the effectiveness of our of our business and wide-ranging social issues environmental endeavors. Through the effective use of wood, a renewable resource, the The Nippon Paper Group has incorporated into its Environmental Nippon Paper Group delivers a wide spectrum of products to Action Plan actions and objectives covering the six basic policies broader society. in its Charter on the Environment. The Group has drawn up the Considering the substantial amounts of energy and water Environmental Action Plan (Green Action Plan 2015, following on used in its manufacturing processes, the Nippon Paper Group from the Green Action Plan 2010), covering fiscal 2011 to fiscal has made reducing the environmental impact of its business 2015, incorporating several new and additional perspectives activities a key corporate social responsibility. We are committed including the value chain and traceability. to increasing the efficiency of operations at every stage of the Group companies have each established their own specific product lifecycle. At the same time, we are promoting effective environmental action plans based on this. Bringing together each measures to address wider environmental issues including global Group company’s efforts is enhancing our ability to accomplish warming, resource recycling, and environmental pollution. the Green Action Plan 2015. * For complete details and the status of progress under the Green Action Plan, please refer to page 33. Charter on the Environment The Essence of the Green Action Plan 2015 Promoting corporate activities that take into consideration the environment based on the philosophy and basic •Promote anti-global warming action policies of our Charter on the Environment Strive for a substantive reduction while replacing “basic unit” The Nippon Paper Group has established the Charter on the with “total quantity” as an index Protect and develop forest resources Environment. Based on the philosophy and basic policies of this • Clearly state the importance of full traceability charter, the Group strives to reduce the environmental impact •Promote the use of recycled resources of its activities across the entire value chain. Looking ahead, Promote the use of recycled resources while replacing “reduction we will pursue corporate activities that address the heightened of final waste volume” with “recycling rate” as an index Observe environment-related laws and reduce environmental awareness of stakeholders. • environmental load Strengthen environmental management from the perspective of a preventive approach in conjunction with efforts to observe environment-related laws

The Nippon Paper Group Charter on the Environment (Established on March 30, 2001, and revised on March 30, 2007)

Philosophy The Nippon Environmental The Nippon Paper Group is committed to helping Paper Group action plans preserve the global environment over the long term Environmental of each Group and contributing to the development of a recycling- Action Plan company based society by carrying out its corporate activities (Green Action Plan in recognition of the importance of biodiversity*. 2015) Each Group company including Basic Policy This plan establishes Nippon Paper 1. Act to counter global warming concrete Group- Industries, and 2. Protect and develop forest resources wide actions and Nippon Daishowa 3. Increase use of recycled resources specific objectives Paperboard, 4. Comply with environmental statutes and work to based on the establishes its own minimize our environmental impact Group’s overarching set of objectives 5. Develop environmentally friendly technologies environmental and actions based and products philosophy and on the Green Action 6. Engage in active environmental communication basic policies. Plan 2015. * Biodiversity typically falls into three different classes: genetic diversity, which refers to the genetic variability within a species; species diversity which covers the variety of species within a community; and ecosystem diversity, which entails the organization of species in an area into distinctive plant and animal communities.

32 Nippon Paper Group Sustainability Report 2012 The Nippon Paper Group Environmental Action Plan (Green Action Plan 2015) Fiscal 2011 Results Environmental Responsibility Page Green Action Plan 2015 Progress No.

Reduce CO2 emissions from fossil energy Notwithstanding the impact of decreased production volumes in the Paper and Paperboard CO2 by 25% versus fiscal 1990. departments, reduced CO2 emissions by 30% as well as the use of fossil energy by 35.7% 41 versus fiscal 1990 through energy-saving initiatives and successful efforts to promote the Reduce the use of fossil energy by 30% conversion of fuel both undertaken throughout the entire manufacturing process. 1. Anti-global versus fiscal 1990. warming action Achieved a modal shift rate of 92%, far surpassing the industry average in Japan, owing to successful efforts to apply highly efficient transportation methods. Currently working to Reduce logistics-generated CO2 emissions. 42 shorten transportation distances through a variety of measures including transit-type transshipment distribution utilizing the structures at the JR cargo station. Management and Policy

Facilitate the Tree Farm Initiative, an overseas afforestation project for procuring sustainable resources, with the aim of Overseas afforestation area stood at 163,000 hectares as of December 31, 2011. 59 increasing overseas afforested area up to 200,000 hectares1.

Maintain forest certification in Currently working to maintain SGEC, FSC®, and PEFC certification at all Company-owned all proprietary forests, both domestically 59, 61 2. Protection and forests in Japan and overseas. development of and internationally. forest resources Ensure that all imported hardwood chips are The volume of PEFC- or FSC®-certified materials handled stood at 97% as of 57 PEFC- or FSC-certified2. December 31, 2011.

Cleared the requirements of PEFC rules in their entirety and FSC® rules to 54% with respect Enhance traceability and facilitate the to the assessment of imported wood risk as of December 31, 2011. Currently conducting — procurement of sustainable forest resources. national controlled wood risk assessment endorsed by the FSC® with respect to wood produced in Japan in conjunction with other institutions.

Increase the ratio of recycled paper to paper Achieved ratios of recycled paper to paper and recycled paper to paperboard of 39.9% and to at least 40%. Increase the ratio of recycled 52 88.9%, respectively, through proactive efforts to utilize recycled paper. paper to paperboard to at least 88%.

Increase the waste recycling rate to at 3. Recycling of least 97%. Achieved a resource recycling rate to the total amount of waste generated of 96.7% and a resources resource recycling rate of 24.2% at the Group’s works through the introduction of 48 Recycle at least 40% of waste generated granulation facilities and successful efforts to effectively use ash. within works.

Reduce water use in Taking steps to maintain material balance and to ascertain the optimal use of water while 49 the manufacturing process. endeavoring to conserve water consumption.

Promoting the introduction of environmental management systems at each of the Group’s Use the environmental management system works while at the same time strengthening the environmental management structure 34 to strengthen environmental management. spearheaded by the Group Management Committee; ISO 14001 certification acquired by 51 4. Observance of bases of 20 consolidated subsidiaries as of October 1, 2012. environment- related laws and Properly control and reduce the use of Took steps to ascertain the types and volumes of chemical substances handled while reduction of 50, 51 hazardous chemical substances. endeavoring to promote proper chemical substance management. environmental load Facilitate the procurement of raw materials Clearly identified energy efficiency as one selection benchmark in the establishment and and equipment with a smaller environmental — renewal of equipment with respect to energy management rules and regulations. burden throughout the supply chain.

Undertook technology and engineering development with respect to the manufacture of cellulose nanofibers. Moving forward, the Group will pursue demonstration trials using Enhance the use of wood materials. 15 pilot plants in an effort to promote the development of products with an eye toward commercialization. 5. Development of eco-friendly Develop equipment technology for Currently promoting the practical application of torrefaction technology as a part of efforts to technologies and facilitating a departure from reliance on use biomass fuels more efficiently. Promoting plans to conduct verification trials utilizing — products fossil energy. large-scale combustion tests.

Currently promoting activities in collaboration with local government agencies as a part of Reduce the environmental load through efforts to establish systems the help to effectively use resources and to reduce environmental 80-82 eco-friendly products and services. load by combining the recovery of recyclable resources with the Group’s products.

Published two types of sustainability reports: a highlight edition (Japanese only) that aims to Disclose environment-related information to enhance communication, and; a detailed edition that is designed to provide in-depth stakeholders whenever appropriate with the information disclosure. Sustainability reports were disclosed in booklet form and posted on 29 use of CSR reports, the website etc. the Company’s website in pdf format. In an effort to provide a more personal environmental and social tool, continued to publish the magazine ShikiOriori.

Placed particular emphasis on risk communication as a part of efforts to share risk 6. Proactive Proactively facilitate environmental information with local communities and to foster relationships of mutual trust. In fiscal 2011, environmental communication on a regional basis through, implemented risk communication at all mills owned and operated by Nippon Paper Industries communication 36 for example, dialogue with local people Co., Ltd. (Risk communication was not implemented at the company’s Ishinomaki Mill due to and governments. the evacuation of local residents.) Steps currently being taken to implement risk communication at Group companies.

Actively participated in environmental endeavors including clean-up and beautification Proactively participate in and support initiatives organized by local communities. At the same time, promoted various activities 95, 98 environment conservation activities. including mill tours and internships.

Currently promoting initiatives in line with core business activities together with activities that Remain aware of the impact of business make the most of proprietary resources and technologies. Positioned forest certification 7. Biodiversity activities on biodiversity, and facilitate systems as one of several biodiversity conservation benchmarks in an effort to promote 44-47 commitments Companywide biodiversity commitments. sustainable forest management in line with core business activities. In addition, undertook such activities as the establishment of bird sanctuaries within Company-owned forests. 1 No deadline has been set at this point. 2 Aside from FM certification, CW certification is also included.

Nippon Paper Group Sustainability Report 2012 33 Environmental Responsibility Policy and Management

Environmental Management Promotion Structure Acquisition of ISO 14001 Certification(as of October 1, 2012) Company Name Mills / Manufacturing Companies / Works Putting in place a Group-wide environmental management Kushiro Mill, Hokkaido Mill (Asahikawa Works, structure in an effort to promote environment management Nippon Paper Yufutsu Works, Shiraoi Works), Ishinomaki Mill, Industries Co., Ltd Iwanuma Mill, Nakoso Mill, Fuji Mill, Iwakuni Mill, The Group Management Committee is responsible for deliberating Yatsushiro Mill, R&D Dept. on and determining the environmental strategies of the Nippon Paperboard Akita Mill, Ashikaga Mill, Soka Mill, Yoshinaga Division Mill, Otake Mill Paper Group while at the same time overseeing the environmental Gotsu Works, Iwakuni Works, activities of the Group as a whole. Chaired by the director Chemical Division Higashimatsuyama Works, Yufutsu Works responsible for environmental management, the Environmental Paper-Pak Division Paper-Pak Division (Takebashi and Oji regions)* Committee draws up the Environmental Action Plan while also Nippon Paper Crecia Co., Ltd Tokyo Mill, Kaisei Mill, Koyo Mill, Kyoto Mill establishing specific targets. This Action Plan serves as the Nippon Paper Papylia basis for practicing the philosophy and basic policies of the Co., Ltd Harada Mill, Suita Mill, Kochi Mill Charter on the Environment (see page 32), which outlines the Kitakami Paper Co., Ltd. Headquarters - Ichinoseki Mill environmental management principles of Group companies. In NP Trading Co., Ltd. Headquarters and works in Japan addition to monitoring the status of progress under the Plan, the Nippon Seitai Headquarters, Hokkaido Works, Niigata Works, Environmental Committee reports to the Group Management Corporation Kanto Works, Kansai Works, Kyusyu Works Committee. Drawing on these reports, the Group Management Daishowa Uniboard Co., Ltd. Miyagi Mill Committee in turn deliberates on and determines new initiatives Headquarters, SHIKOKU COCA-COLA as a part of efforts to oversee the environmental activities of the SHIKOKU COCA- PRODUCTS CO., LTD., SHIKOKU SAWAYAKA COLA BOTTLING SERVICES CO., LTD. headquarters, SHIKOKU entire Group and to promote ongoing improvement. CO., LTD. CANTEEN COLTD. headquarters, DYNAFLOW CO., LTD. headquarters The Nippon Paper Group’s Environment Nippon Paper Lumber Co., Ltd. Insulator Sales Department Iwaki Mill Promotion Structure N&E Co., LTD. President and Nippon Paper Representative Director Development Co., Headquarters, Landscape Department, Tokyo Ltd. Department Sakurai Co., Ltd. Headquarters Nippon Paper Group, Inc. Group Management Committee Nippon Paper All departments (Electric Device Department, Ishinomaki Machinery Department, Construction Report Approve Technology Co., Ltd. Department) Nippon Paper The Nippon Paper Group Environment Committee Industries USA Co., Port Angeles Mill Ltd. Chairperson: Director responsible for environmental management Paper Australia Pty. Ltd. Maryvale, Shoalhaven

South East Fibre Eden Executive Office, Exports Environment & Safety Department * The production subsidiary of Nippon Paper Industries’ Paper-Pak Division, SOKA PAPER-PAK CO., LTD., EGAWA PAPER-PAK CO., LTD., MIKI PAPER-PAK CO., LTD., and ISHIOKA KAKO CO., LTD. have also acquired ISO 14001 certification.

The status of Eco-Action 21 acquisition (as of October 1, 2012)

Group companies in Japan Group companies outside Company Name Mill / Works (36 companies included in of Japan (12 companies included in the scope of Akita Jujo Chemicals Head Office Plant the scope of consolidation) consolidation) Co., Ltd.

•Introducing environmental management systems Strengthening Environmental Compliance As one measure aimed at promoting environmental management, the Nippon Paper Group is introducing various environmental Engaging in activities designed to bolster environmental management systems including ISO 14001, the international compliance, including environmental audits standard for environmental management, and Eco-Action 21. In order to better manage and reduce the burden imposed on The Nippon Paper Group’s consolidated subsidiaries and the environment by its corporate activities, the Nippon Paper principal production bases boast a 100% ISO 14001 certification Group is strengthening environmental compliance. At the same acquisition rate. time, the Group is promoting activities to prevent problems from occurring and establishing a framework that ensures all problems come to light.

34 Nippon Paper Group Sustainability Report 2012 Bolstering environmental compliance Principal areas of legal compliance environmental Environmental Responsibility audit implementation Promoting activities to prevent problems from occurring • Building a workplace that places the utmost importance on 2007 Air Pollution Control Act, Water Pollution Control Act the environment 2008 Air Pollution Control Act, Water Pollution Control Act, Law Concerning • Reinforcing systems to identify laws and regulations Special Measures Against PCB Waste • Implementing measures from both the facility and 2009 Air Pollution Control Act, Water Pollution Control Act technology perspectives 2010 Air Pollution Control Act, Pollutant Release and Transfer Register (PRTR) Law, Law Concerning the Recovery and Destruction of Fluorocarbons Policy and Management and Policy 2011 Water Pollution Control Act, Poisonous and Deleterious Substances Control Act Establishing a framework that ensures all problems 2012 Wastes Disposal and Public Cleansing Act, Poisonous and Deleterious come to light Substances Control Act • Bolstering environmental audits • Strengthening the environmental management structure • Engaging in environmental communication and active information disclosure Breaches of Statutory Requirements and the Status of Accidents •Strengthening the framework for reliably identifying No instances of adverse disposition imposed by laws to be observed regulatory authorities To accurately respond to wide-ranging and relatively frequent We were not subject to any form of disciplinary action from changes in environmental legislation, Nippon Paper Industries has regulatory authorities (suspension of licenses, orders to suspend the signed advisory agreements with knowledgeable legal experts. use of facilities or fines) with respect to compliance in fiscal 2011. A new legal search system, as well as advice on new and complex laws, has bolstered the framework for reliably identifying Environmental accidents at the Nippon Paper Group laws to be observed and their content. (1) Exceeding regulatory drainage water quality limits •Environmental audits that place particular emphasis at the Kushiro Mill owned and operated by Nippon on legal compliance Paper Industries Co., Ltd. The Nippon Paper Group has continued to conduct environmental Approximately 13,000 tonnes of drainage water containing audits that place particular emphasis on legal compliance since caustic soda was discharged into Kushiro Harbor due fiscal 2007 in an effort to adhere strictly to all relevant statutory to erroneous valve operations at the company’s filtration and regulatory requirements. These audits are based on the systems used to control liquid waste discharged during the guideline published by Japan’s Ministry of the Environment and pulp manufacturing process on December 20, 2011. While Ministry of Economy, Trade and Industry in March 2007 and are the drainage water discharged exceeded the Chemical helpful in verifying the status of compliance. Oxygen Demand (COD)* regulatory limit stipulated under The Group has also prepared an environmental compliance the Water Quality Pollution Control Act by a maximum of checklist, which underpins internal audits conducted at each 1.3 times, no impact on health or the fishing industry has mill. On completion, the officer in charge of the Company’s head been confirmed. office Environment & Safety Department conducts an additional (2) Chemical spill at the Gotsu Works owned and environmental audit. This system of complementary checks operated by Nippon Paper Chemical Co., Ltd. and balances helps enhance efforts aimed at ensuring legal On July 5, 2012, approximately eight tonnes of magnesium compliance. Moreover, the Nippon Paper Group has put in place hydroxide solution leaked from the upper portion of an outdoor a system of mutual audits. Under this system, officers responsible storage tank located at the company’s Gotsu Works. While for the environment at other Group companies participate in the a portion of this spillage leaked through to Gotsu Harbor, no audits of each company. impact on health or the environment has been confirmed.

Despite the absence of any adverse disposition as a result of these incidents, the Nippon Paper Group deeply regrets the inconvenience caused to local residents. Moving forward, the Group will bolster its management and make every effort to prevent a recurrence.

The examination of documents Response training in the event * Chemical Oxygen Demand (COD): An index that measures the level during an environmental audit of a chemical spill during an of water contamination. (Nippon Paper Industries Co., Ltd) environmental audit (Nippon Paper Crecia Co., Ltd)

Nippon Paper Group Sustainability Report 2012 35 Environmental Responsibility Policy and Management

Environmental Communication Environmental Education and Training Actively promoting environmental communication and Supporting employees increase their knowledge and skills reflecting feedback into our environmental activities The Nippon Paper Group provides environmental education •Risk communication mainly at works that have acquired ISO 14001 certification. This The Nippon Paper Group places particular emphasis on sharing education is aligned to the career status of each employee from risk information in an effort to nurture strong ties of trust with basic knowledge about the environment to specialist education local communities. To this end, the Group engages in risk for operators of environmental facilities including wastewater communication with local residents at each of its mills. We treatment plants. In addition, the Group encourages employees recognize that in creating opportunities to exchange information to attend externally organized training seminars to further their about the risks associated with chemical substances and qualifications and skills. disasters, we are better placed to raise mutual awareness toward safety measures and to foster a greater sense of cooperation. •The Nippon Paper Group Eco Photo Award When installing large-scale equipment, the Nippon Paper Group The Nippon Paper Group also conducts explanatory meetings to provide local residents with has held the Eco Photo a better understanding of any impact on the environment. Awards in June as a part of its In fiscal 2011, particular Environment Month activities. emphasis was placed Through the medium of on promoting dialog with photos, this initiative is another stakeholders as a part of efforts opportunity for employees and Fiscal 2012 to further bolster information their families to focus on An entry in the Eco Photo Award disclosure. To this end, the Group the environment. “Forest regeneration” Risk communication meeting drew up its Risk Communication held at Nippon Paper Industries’ Asahikawa Works Guidelines. •Environmental e-Learning The Nippon Paper Group has introduced an online educational •Environment-related complaints program to allow employees to learn about the environment at a The Nippon Paper Group handled 34 environment-related time, place, and pace of their own convenience. complaints in fiscal 2011. With each complaint, the relevant In fiscal 2012, the Group conducted a “Things we’d like you to mill took steps to determine the cause, and took swift know! Air and water: environmental issues for the Nippon Paper countermeasures. In those instances where an immediate Group” program. response was not possible, all appropriate measures were taken to act as quickly as possible. Later, consideration was given to each complaint to ensure a permanent solution. With each complaint, the Group takes steps to explain the details of remedial action to be taken and to obtain the necessary acknowledgement. The Nippon Paper Group has established a complaint and Online site on environmental inquiry desk at each of its mills. We have also adopted environmental e-learning monitoring systems that are effectively driven by local residents to ensure that their comments are appropriately conveyed. External awards for environmental conservation activities

The Nippon Paper Group received the following external Environment-related complaints (fiscal 2011) awards for its environmental conservation activities in No. of No. of Item complaints Item complaints fiscal 2011. Noise 11 Vibration 1 External Awards for Environmental Conservation Dust and mist 8 Smoke 0 (Fiscal 2011) dispersal Activities Offensive odor 7 Other 7 Award Recipient Award Organization Total 34 Nippon Paper Shizuoka Prefecture Governor of Industries Co., Ltd. Governor’s award for global Shizuoka Fuji Mill warming prevention activities Prefecture Bureau Chief of Nippon Paper Award presented to business the Chugoku Crecia Co., Ltd. operators exhibiting excellence Bureau of Iwakuni Mill in energy management Economy, Trade and Economy NP Trading Award for global warming Co., Ltd. prevention action plan in the Chiyoda ward Headquarters energy conservation category office

36 Nippon Paper Group Sustainability Report 2012 Environmental Accounting of ¥30.7 billion. Environmental Responsibility In fiscal 2011, environmental conservation expenses increased Investments for environmental conservation totaled ¥1.4 billion and the total cost for environmental conservation approximately ¥5.0 billion, while environmental climbed ¥0.8 billion. conservation expenses amounted to around ¥30.7 billion Turning to environmental liabilities, the Nippon Paper Group The total cost for environmental conservation amounted to recorded a provision for environmental measures totaling ¥0.6 billion approximately ¥35.7 billion in fiscal 2011. This was largely on its consolidated balance sheet to cover costs for PCB treatment. comprised of investments totaling ¥5.0 billion and expenses Policy and Management and Policy

Environmental accounting* Environmental conservation costs (Millions of yen) Categories Principal Activities Investment Cost (1) Business area cost Costs for maintaining, managing and improving air and water pollution 1. Pollution prevention cost prevention facilities 785 16,995 2. Global environmental Costs for preventing global warming as well as maintaining and managing conservation cost Company-owned forests 3,110 840 Costs for effectively utilizing recycled paper as well as treating, reducing and 3. Resources circulation cost recycling industrial waste 1,080 7,811 (2) Upstream / downstream cost Costs for recovering pallets, etc. – 2,340 Costs for ISO 14001 inspection, operation and management; environmental (3) Administration costs information disclosure; employee environmental education; and workplace – 513 cleaning initiatives. Costs for R&D relating to environmentally friendly products as well as the (4) R&D cost reduction of environmental load imposed by paper manufacturing processes. – 1,260 Costs for local community natural conservation, tree planting, cleaning and (5) Social activity costs landscaping activities, as well as donations and support for – 207 environmental organizations. (6) Environmental remediation costs Pollution-related health damage compensation (SOx) – 719 Total 4,975 30,685

Results of environmental impact in 2010

Categories Environmental Impact Indicators Results YoY Change Effects related to resources Afforestation projects overseas Overseas afforestation areas 163,000 hectares – introduced to business activities Energy-saving measures Fuel use (fuel oil equivalent) – Down 31,455 kl

Greenhouse gas emission control CO2 emissions from fossil energy 6,550,000 tonnes Down 680,000 tonnes NOx emissions (NO equivalent) 7,052 tonnes Down 675 tonnes

Emissions of hazardous air pollutants SOx emissions (SO2 equivalent) 3,375 tonnes Down 580 tonnes Effects related to environmental Soot and dust emissions 1,253 tonnes Up 25 tonnes impact and waste from business activities Wastewater 843,000,000 tonnes Down 99,000,000 tonnes Emissions of water contaminants COD/BOD emissions 46,930 tonnes Down 8,574 tonnes SS emissions 16,782 tonnes Down 3,530 tonnes Final waste disposal 43,600 tonnes Up 12,900 tonnes Recycled paperutilization rate (paper) 39.9% Up 0.9% Effects related to environmental Product recycling impact and waste from Recycled paper utilization rate business activities (paperboard) 88.9% Up 0.4% Shipping material recycling Pallet recovery rate 40.8% Down 0.8%

Economic benefits of environmental conservation (Millions of yen) Effect Amount Income from Company-owned forests in Japan 657 Reduced expenses from energy saved 1,276 Reduced expenses through the effective use of waste 4,665 Gain on sales from the effective recycling of waste 726 Reduced expenses through the recycling of shipping materials 190 Total 7,514 * Accounting standards are based on Environmental Accounting Guidelines 2005.

Nippon Paper Group Sustainability Report 2012 37 Environmental Responsibility Material Balance Reducing the environmental impact of our activities, mainly among the manufacturing processes of our mainstay pulp and paper business

Material Balance materials into pulp, the pulp is diluted with water to produce pulp slurry and then formed as wet thin sheets. The water is then Identifying and reducing the environmental impact of our removed by drying to make paper. In the pulp and papermaking business activities processes, steam is used as a heat source and electricity as a The Nippon Paper Group engages in a broad range of paper- power source. Pulp and paper mills are equipped with boilers related and other business activities driven primarily by the that combust fuel to generate steam as well as private electric Pulp and Paper Division. In addition to accounting for 78% of generators that generate electricity from steam utilizing turbines. total net sales, the Pulp and Paper business is responsible for Unfortunate byproducts of the pulp and paper manufacturing approximately 92% of both the Group’s water consumption and process are effluents containing water contaminants as well as CO2 emissions. Accordingly, this Division plays a major role in the gases containing air pollutants and CO2. Moreover, the fuels Group’s efforts to maintain material balance. combusted by boilers produce ash waste. With this in mind, the Woodchips and recycled paper make up the bulk of raw Nippon Paper Group strives to reduce the environmental impact materials used to make paper. After converting these raw of these pollutants.

Material balance in the Pulp and Paper Division in Japan (principal materials)

Production and supply Recycled paper Input Pulp manufacturing Use

Raw materials Chemical pulp Sodium hydrate, Chlorine, oxygen, ozone, Transportation sodium sul de hydrogen peroxide, chlorine dioxide Fuel Woodchips 4,801,000 BD tonnes In Pulp In In Logs 30,000 BD tonnes Output Cooking Pulp 393,000 AD tonnes (into bers) Cleaning Bleaching Products Paper, household Recycled paper Woodchips (pulp) 3,132,000 AD tonnes Out paper products 4,110,000 tonnes Out Black liquor CO2 Chemical substances subject to Amount consumed 3,264,000 tonnes Efuent (COD, SS) Paperboard 1,450,000 tonnes the PRTR Law Energy Pulp 134,000 tonnes (electricity, Mechanical pulp (Amount handled) 462 tonnes steam) Energy (electricity) Hydrogen peroxide In In Water consumption 785,000,000 tonnes Breakdown of products of the Pulp and Energy input Grinding Bleaching Paper Division (Japan) Electricity 1,729 GWh (2011 calendar year basis) Paper production Oil 378,000 kℓ Private power Woodchips, logs Out Other Newsprint generation Efuent (COD, SS) Energy (heat) paperboard 2% 17% Coal 1,937,000 tonnes facilities Surface In Gas 100,000 tonnes Recycled paper pulp Surfactant Sodium silicate, hydrogen peroxide, treatment Sodium hydrate thiourea dioxide Coated Printing and Other non-fossil fuels 1,406,000 tonnes In duplex board 4% In writing paper In 39% Out Removal of Removal of ink Linerboard and Separation contraries (deinking) Bleaching Dewatering Drying Rolling corrugated CO2 medium Out 20% Business SOx Out communication Recycled paper Out Efuent (COD, SS) NOx Vinyl, staples, Efuent (COD, SS) Miscellaneous paper 10% adhesive in spines paper 3% Energy Sanitary Packaging (electricity, steam) paper 3% paper 2%

Materials procurement Output Waste generation Wastewater 754,000,000 tonnes Chemical substances subject to the PRTR Law Gas emissions 633,000 BD tonnes COD/BOD 39,000 tonnes (Amount released) 76 tonnes CO2 emissions originated from fossil fuels 6,050,000 tonnes Afforestation areas and other SS 15,600 tonnes (Amount transferred) 12 tonnes SOx emissions 3,150 tonnes Nitrogen 1,380 tonnes NOx emissions 6,630 tonnes Timber processing Phosphorous 150 tonnes (crushing into chips) Soot and dust 1,190 tonnes Ef cient use Final waste disposal 613,000 BD tonnes 20,000 BD tonnes

Cutoffs and thinned wood

38 Nippon Paper Group Sustainability Report 2012 Balance of materials for all business (principal materials) Environmental Responsibility Input Output

Fossil energy input Water consumption CO2 emissions from fossil energy Nitrogen 1,390 tonnes Electricity 1,861 GWh 870,000,000 tonnes 6,550,000 tonnes Phosphorous 160 tonnes Oil 387,000 kℓ River water 644,000,000 tonnes SOx emissions 3,370 tonnes Waste generation 688,000 BD tonnes Coal 2,019,000 tonnes Industrial water NOx emissions 7,050 tonnes Final waste disposal 44,000 BD tonnes 196,000,000 tonnes Gas 111,000 tonnes Soot and dust 1,250 tonnes Effective use 644,000 BD tonnes Well water 29,000,000 tonnes Non-fossil energy input Chemical substances subject to Products manufactured

Public water supply the PRTR Law Material Balance Black liquor 3,328,000 tonnes 1,000,000 tonnes Paper, household paper (Amount released) 273 tonnes 4,260,000 tonnes Other non-fossil 1,411,000 tonnes Raw materials fuels* (Amount transferred) 83 tonnes Paperboard 1,450,000 tonnes Woodchips 5,180,000 tonnes Chemical substances subject to Wastewater 843,000,000 tonnes Pulp 214,000 tonnes Logs 30,000 tonnes the PRTR Law Public water 840,000,000 tonnes Paper container 102,000 tonnes (Amount handled) 17,000 tonnes Pulp 397,000 tonnes Sewerage 2,000,000 tonnes Recycled paper Chemical products 137,000 tonnes (pulp) 3,166,000 tonnes COD/BOD 47,000 tonnes Building materials 99,000 tonnes Base paper 122,000 tonnes SS 17,000 tonnes Beverages 142,000 tonnes

* Biomass fuels, except for black liquor, and waste fuels

Production and supply Recycled paper Input Pulp manufacturing Use

Raw materials Chemical pulp Sodium hydrate, Chlorine, oxygen, ozone, Transportation sodium sul de hydrogen peroxide, chlorine dioxide Fuel Woodchips 4,801,000 BD tonnes In Pulp In In Logs 30,000 BD tonnes Output Cooking Pulp 393,000 AD tonnes (into bers) Cleaning Bleaching Products Paper, household Recycled paper Woodchips (pulp) 3,132,000 AD tonnes Out paper products 4,110,000 tonnes Out Black liquor CO2 Chemical substances subject to Amount consumed 3,264,000 tonnes Efuent (COD, SS) Paperboard 1,450,000 tonnes the PRTR Law Energy Pulp 134,000 tonnes (electricity, Mechanical pulp (Amount handled) 462 tonnes steam) Energy (electricity) Hydrogen peroxide In In Water consumption 785,000,000 tonnes Breakdown of products of the Pulp and Energy input Grinding Bleaching Paper Division (Japan) Electricity 1,729 GWh (2011 calendar year basis) Paper production Oil 378,000 kℓ Private power Woodchips, logs Out Other Newsprint generation Efuent (COD, SS) Energy (heat) paperboard 2% 17% Coal 1,937,000 tonnes facilities Surface In Gas 100,000 tonnes Recycled paper pulp Surfactant Sodium silicate, hydrogen peroxide, treatment Sodium hydrate thiourea dioxide Coated Printing and Other non-fossil fuels 1,406,000 tonnes In duplex board 4% In writing paper In 39% Out Removal of Removal of ink Linerboard and Separation contraries (deinking) Bleaching Dewatering Drying Rolling corrugated CO2 medium Out 20% Business SOx Out communication Recycled paper Out Efuent (COD, SS) NOx Vinyl, staples, Efuent (COD, SS) Miscellaneous paper 10% adhesive in spines paper 3% Energy Sanitary Packaging (electricity, steam) paper 3% paper 2%

Materials procurement Output Waste generation Wastewater 754,000,000 tonnes Chemical substances subject to the PRTR Law Gas emissions 633,000 BD tonnes COD/BOD 39,000 tonnes (Amount released) 76 tonnes CO2 emissions originated from fossil fuels 6,050,000 tonnes Afforestation areas and other SS 15,600 tonnes (Amount transferred) 12 tonnes SOx emissions 3,150 tonnes Nitrogen 1,380 tonnes NOx emissions 6,630 tonnes Timber processing Phosphorous 150 tonnes (crushing into chips) Soot and dust 1,190 tonnes Ef cient use Final waste disposal 613,000 BD tonnes 20,000 BD tonnes

Cutoffs and thinned wood

Nippon Paper Group Sustainability Report 2012 39 Environmental Responsibility Mitigation of Climate Change Reducing CO2 emissions at every stage of our business activities

Objectives and Initiatives Regarding Global Reducing the Use of Fossil Fuels Warming Prevention Actively using biomass and waste fuels Promoting three core initiatives in an effort to prevent The Nippon Paper Group is working to curtail fossil fuel global warming consumption in an effort to prevent global warming, a major factor Placing considerable emphasis on the first basic policy of its in climate change issues. As one of several measures, we have Charter on the Environment, the Nippon Paper Group formulated systematically installed highly efficient boilers as well as boilers an environmental action plan, the Green Action Plan (see page that are capable of combusting biomass and waste fuels since 33), as a part of its efforts to prevent global warming. fiscal 2004. The Nippon Paper Group is working to achieve the The Nippon Paper Group installed 10 boilers in Japan that aforementioned objectives by adopting three core initiatives. As can combust such carbon neutral non-fossil fuels as biomass and a part of efforts to reduce CO2 emissions across every stage of refuse including construction waste, materials as well as used tires our business activities, we are (1) converting to non-fossil energy and refuse paper and plastic fuel (RPF)*. Through these means, by employing boilers that use biomass and waste fuels (see we are reducing the amount of fossil fuels consumed. page 40), (2) conserving energy in each of the production and * Refuse paper and plastic fuel (RPF): Fuel derived from paper that is unusable as recycled paper and waste plastic. transportation processes (see page 42), and (3) managing forests properly to ensure CO2 absorption/sequestration (see page 43). Status of boiler installation (Fiscal 2004 to fiscal 2009)

The objectives of the Green Action Plan 2015 aimed at Date Company Amount of (Formulated in December 2011) Operation Mill Name Location Evaporation preventing global warming Commenced Name (tonnes/h) September Fukushima Nakoso Mill 105 • Reduce per-unit CO2 emissions from fossil energy 2004 Prefecture Ishinomaki Miyagi consumption per product by 25% compared to fiscal October 2006 180 Mill Prefecture 1990 levels Nippon Paper Shizuoka October 2007 Fuji Mill 230 • Reduce units of fossil energy per product by 30% Industries Prefecture December Iwanuma Miyagi compared to fiscal 1990 levels 230 2007 Mill Prefecture • Reduce logistics-generated CO2 emissions Yamaguchi February 2008 Iwakuni Mill 180 Prefecture Akita May 2008 Akita Mill 180 Nippon Prefecture Daishowa The Nippon Paper Group’s Initiatives Yoshinaga Shizuoka June 2008 Paperboard 180 Mill Prefecture Prevention of Global Warming Hokkaido Mill August 2008 Hokkaido 300 Shiraoi Works Reduction of CO2 emissions Nippon Paper Absorption of CO2 in forests from operations Industries Hokkaido Mill October 2008 Hokkaido 180 Asahikawa Works Carbon Fuel conversion Energy saving Nippon CO2 Hiroshima sequestration April 2009 Daishowa Otake Mill 280 Prefecture Paperboard CO2 CO2 Non-fossil Fossil energy energy CO2 CO2 Fuel Conversion through the Effective Use of Waste Effectively utilizing waste as refuse-derived fuel Steps were taken to upgrade and expand RPF facilities at the Ichinoseki Mill owned and operated by Kitakami Paper Co., Ltd. in order to better promote the conversion of waste generated by the Mill into fuel. By augmenting facilities, Kitakami Paper has increased the effective use of waste by 20%. In addition to halving the amount of waste generated, this initiative has RPF facilities at the Ichinoseki Mill, helped to curb the amount of Kitakami Paper Co., Ltd. CO2 emissions from fossil fuels.

40 Nippon Paper Group Sustainability Report 2012 1 Environmental Responsibility Fiscal 2011 Results Fig. 1. CO2 emissions from fossil energy (all businesses ) (Millions of tonnes of CO2) Identifying goals through to fiscal 2015 and working to 10 9.10 30.0% reduction 8.67 compared to fiscal 1990 reduce CO2 emissions 7.73 8 7.24 7.06 Progress under the Green Action Plan 2015 6.37 • 6 Under its Green Action Plan 2015 (see page 33), the Nippon Paper Group has identified two overarching targets: to reduce per-unit 4 CO2 emissions from fossil energy consumption per product by 2 25% compared to fiscal 1990 levels and to reduce the units of Mitigation of Climate Change 0 fossil energy per product by 30% compared to fiscal 1990 levels. 1990 2007 2008 2009 2010 2011 (FY) While the Group’s performance was affected by cutbacks in production in the pulp and paper business due mainly to the Great Fig. 2. Energy input (all businesses1) East Japan Earthquake, the amount of CO2 emissions as well as (Millions of gigajoules) Fossil energy Non-fossil energy fossil energy consumed fell by approximately 30.0% and 35.7%, 150 130 35.7% reduction respectively, in fiscal 2011, compared with the levels recorded in 116 compared to fiscal 1990 102 fiscal 1990. This was largely attributable to energy-saving 100 94 92 83 83 79 75 activities undertaken throughout the manufacturing process (see 66 72 68 figures 1 and 2). At the same time, the Nippon Paper Group has 50 confirmed that its consumption of non-fossil energy as a ratio of total energy used has risen from 33% in fiscal 1990 to 45% 0 in fiscal 2011 (see figure 5). This reflects the positive effects of 1990 2007 2008 2009 2010 2011 (FY) introducing boilers that combust biomass and waste fuels through 1 Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Co., Ltd., Nippon Paper Crecia Co., Ltd., Kitakami Paper Co., Ltd., KOYO PAPER MFG. to fiscal 2009. CO., LTD., Nippon Paper Papylia Co., Ltd., NIPPON PAPER-PAK CO., LTD., Over and above the amounts of CO2 released and fossil Nippon Seitai Corporation, Nippon Paper Chemicals Co., Ltd., N&E Co., Ltd., SHIKOKU COCA-COLA BOTTLING CO., LTD., GAC CO., LTD., Nippon Paper energy consumed, the Nippon Paper Group is endeavoring to Development Co., Ltd. enhance the efficiency by per-unit CO2 emissions as well as the units of fossil energy used. In this regard, the levels of per-unit Fig. 3. Per-unit CO2 emissions from fossil energy 2 CO2 emissions from fossil energy consumption per product as (Pulp and Paper Business ) well as the units of fossil energy per product recorded in fiscal (Tonnes of CO2 per tonne of products) 1.2 2011 were essentially the same as those reported in the previous 1.20 fiscal year (see figures 3 and 4). 12.5% reduction 1.10 compared to fiscal 1990 Generally speaking, a drop in production volumes in the 1.1 1.09 1.09 manufacturing industry leads to the deterioration of units of 1.05 1.05 output, a key measure of production efficiency. The impact of a drop in production is made worse in the paper manufacturing 1.0 industry by the decline in black liquor emitted during the manufacturing process, which is used as a carbon neutral non- 0 fossil fuel. 1990 2007 2008 2009 2010 2011 (FY) Despite difficulties in securing a major recovery in production, we will work diligently to prevent global warming by aggressively Fig. 4. Units of fossil energy (Pulp and Paper Business2) engaging in energy-saving activities going forward. (Gigajoules per tonne of products) 18 17.0 Fig. 5. Non-fossil fuel usage ratio (calories) 17 Non-fossil energy Non-fossil energy 33% 16 45% 19.4% reduction compared to fiscal 1990 15 14.5 14.3 14.3 Fiscal Fiscal 1990 2011 14 13.7 13.7

Fossil energy Fossil energy 0 67% 55% 1990 2007 2008 2009 2010 2011 (FY) 2 Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Co., Ltd., * Fiscal 2011: Calculations based on Nippon Keidanren’s Follow-up to the Nippon Paper Crecia Co., Ltd., Nippon Paper Papylia Co., Ltd., Kitakami Paper Keidanren Voluntary Action Plan on the Environment Co., Ltd., KOYO PAPER MFG. CO., LTD. * Non-fossil energy: Includes biomass and waste energy

Nippon Paper Group Sustainability Report 2012 41 Environmental Responsibility Mitigation of Climate Change

Logistics-Related Initiatives •Putting in place a logistics structure and systems that help shorten transportation distances The Nippon Paper Group is working with the logistics industry The Nippon Paper Group is endeavoring not only to review its own as well as with customers to promote green logistics. logistics structure and systems, but also to eliminate inefficiencies The Nippon Paper Group focuses mainly on the two core initiatives in distribution while cooperating with customers. Through these of improving its loading efficiency to secure an industry-leading means, the Group is working to shorten transportation distances. modal shift rate and shortening transportation distances. Through these means, the Group is endeavoring to reduce CO2 emissions. Transit-type transshipment distribution that utilizes the structures within JR cargo stations The Nippon Paper Group’s logistics-related initiatives Nippon Paper Industries is engaging in Transit-type Green Logistics transshipment distribution in an effort to shorten transportation distances. By utilizing the structures within Shortening Improving loading efficiency transportation distances JR cargo stations as temporary holding facilities, the company is eliminating the need for inventory storage Promoting a modal Pursuing direct shift to rail or delivery and within existing warehouses at each point of consumption. marine transportation joint delivery Transit-type transshipment distribution mechanism

Transit-type Transportation that utilizes transshipment distribution Promoting a modal shift in transportation to secure warehouses at the point Use of the structures within • of consumption JR cargo stations high loading efficiency The Nippon Paper Group is promoting a modal shift in Rail transportation Rail transportation transportation. This modal shift entails the increased use of rail and

marine transportation. By increasing load efficiency, particularly Mill Mill over long distances, we are reducing the environmental impact of our activities. Trucks

Nippon Paper Industries achieved a modal shift rate* of 92% in Printing house JR cargo station Printing house fiscal 2011. This far surpassed the domestic and industry averages. JR cargo station * Modal shift rate: Trucks Temporary placement The percentage of rail or marine (including ferries) transport in miscellaneous within structures cargo transported over 500 kilometers. Trucks

Warehouse at the point of consumption Shorten transportation Comparison of modal shift rates distance Japan average Storage as inventory (Fiscal 2005: Data released by Japan’s 38% Ministry of Land, Infrastructure, Transport and Tourism) Paper manufacturing industry average 80% Joint delivery activities in concert with (Fiscal 2011: Data released by the Japan the distribution industry Paper Association) Nippon Paper Industries Co., Ltd. 92% (Fiscal 2011) For the same items stored and handled by the Nippon 0 20 40 60 80 100 Paper Group and the distribution industry, every effort is made to transport products in lots rather than small quantities. This initiative is designed to prevent global warming through the efficient use of truck transportation.

Existing transportation method Joint delivery activities 配送 Nippon Paper Nippon Paper Industries Co., Ltd. Industries Co., Ltd. + Distribution Distribution直接納入 company A company A Distribution Distribution company B Warehouse company B Printing house Warehouse Printing house

42 Nippon Paper Group Sustainability Report 2012

配送

直接納入 Carbon Sequestration Preventing Global Warming through the Use of Trees Environmental Responsibility

CO2 absorption by 253,000 hectares of forests in and Promoting the use of trees as a part of efforts to prevent outside Japan global warming

As trees grow, they absorb CO2 from the atmosphere. As they The carbon inherent in trees as a result of sequestration is are a major repository of carbon, it is widely recognized that the maintained after processing into building materials and paper proper protection of forests helps prevent global warming. products. Products derived from forests and wood-based Together with its 90,000 hectares held across 30 prefectures materials therefore play a role in reducing the level of CO2 in in Japan, the Nippon Paper Group manages 163,000 hectares the atmosphere. In light of this factor, the active recycling of Mitigation of Climate Change of forests overseas for an aggregate total of 253,000 hectares. paper helps to conserve natural resources while at the same Through proper forest management, the Group retains its CO2 time facilitating CO2 sequestration over the longest possible sequestration capabilities. These forests, both in and outside term. Moreover, following their use as construction and other Japan, keep approximately 40 million tonnes of CO2. By building materials, tree byproducts can be employed as biomass fuels a significant repository for carbon, we are contributing to global that do not increase CO2 in the atmosphere. The Nippon Paper warming prevention. Group is making every effort to prevent global warming by further enhancing the efficiency of wood resource use.

One of the largest corporate users of biomass energy in Japan

The Nippon Paper Group is an active user of such non-fossil energy as wood-based biomass and waste fuels. The ratio of Biomass energy utilization non-fossil energy to total energy consumed by the Group is 45%. In addition, the amount consumed accounts for up to 8.3%* of non-fossil energy used in Japan. In specific terms, wood- Photosynthesis based biomass fuels, including black liquor and construction Timber residence Construction Biomass and waste materials, make up 86% of this total. As such, the waste materials waste boiler Biomass fuels Nippon Paper Group is Japan’s largest corporate user of

biomass energy. Pulp

Photosynthesis

The quantity of non-fossil energy (excluding Woodchips Black liquor Recovery Timber residence Construction Biomass and boiler nuclear and water power) supplied in Japan waste materials waste boiler Biomass fuels (Fiscal 20101) The amount of non-fossil Pulp Geothermal energy energy consumed by (23PJ) the Nippon Paper Group (68PJ. Of this amount, 86.0% is Black liquor Natural energy including wood-based biomass energy) solar and wind energy2 Woodchips Black liquor Recovery (172PJ) Black liquor, a boilerbyproduct of the pulp manufacturing process, is a wood-based biomass fuel that is unique to the paper manufacturing industry. Black liquor is used as a fuel in recovery boilers. Each year, the Nippon Paper Group’s use Total of black liquor at 12 of its mills is equivalent to 1.3 million kiloliters of crude oil. 816PJ4

Other non-fossil energy3 (621PJ) Photosynthesis Construction and other waste materials 1 Source: Timber residence Construction Biomass and In-house data prepared from energy supply results by the Resources wasteAfter materials black liquor,waste boiler construction and other waste materials Biomass fuels Energy Agency are the second most used wood-based biomass fuel. Since 2 Excluding private power generating facilities with a capacity of less than 2004, the Nippon Paper Group has installed boilers that are 1,000 kilowatts. Power generated using private biomass power generation Pulp facilities included from fiscal 2010. capable of combusting these fuels at eight of its mills. Each 3 Other non-fossil energy is equivalent to the unused portion of energy year, the Nippon Paper Group utilizes wood-based biomass based on the Resources and Energy Agency data identified in note1, Woodchips Blackfuels liquor to an equivalentRecovery of 330,000 kiloliters of crude oil. including waste power generation, direct-use black liquor, and waste boiler energy recovery. 4 Unit: PJ (Petajoule: 10 to the 15th power Joules)

Nippon Paper Group Sustainability Report 2012 43 Environmental Responsibility Biodiversity Conservation The Nippon Paper Group promotes biodiversity conservation in the conduct of its mainstay business activities, as well as a variety of pursuits that harness its proprietary resources and technologies.

Basic Stance Overview of biodiversity conservation activities The Nippon Paper Group is pursuing activities that promote Initiatives involving our main businesses biological diversity conservation and the sustainable use of • Forest management that takes into consideration biodiversity its components. • Sustainable wood raw material procurement (supply chain activities) The lifestyle of humankind is grounded in the benefits provided by • Environmental load reduction through our manufacturing activities the diversity of all living things (ecosystem services) that inhabit the earth. Currently, however, it is the activities of humankind that threaten this biodiversity. As a part of efforts to address this issue, the Aichi Biodiversity Targets and Nagoya Protocol were adopted at the 10th meeting of the Conference of the Parties (COP 10) Activities that leverage the Group’s resources and technologies to the Convention on Biological Diversity held in Nagoya, Aichi • Conservation work that harnesses proprietary technologies Prefecture, in October 2010. • Activities that utilize Company-owned forests The business activities of the Nippon Paper Group, which directly entail the cultivation and utilization of forests, therefore have an inherently significant and wide-ranging impact on Enhancing Awareness toward the Importance of biodiversity. With this in mind, we recognize that the sustainable Biodiversity Both within and outside the Group use of forests and our ability to ensure abundant forest areas for the future are fundamental to our existence and development as a The Nippon Paper Group engages in activities aimed at enhancing going concern. awareness toward the importance of biodiversity conservation As a corporate entity whose existence and development both within and outside the Group. Among a host of initiatives, the depends on the use of trees, the very bounty of forests, we Group has continued to conduct workshops to promote in-house recognize that any loss and depletion in forest areas will eventually awareness while publishing special features on biodiversity in its lead to our demise. The Nippon Paper Group therefore maintains corporate communications magazine. In fiscal 2011, biodiversity a deep respect for and appreciation of this bounty. At the same was introduced as a core theme of the 4th Global Environment time, we are committed to the objectives of the Convention on Forum. Mr. Hiroshi Yagyu, chairperson of the Wild Bird Society of Biological Diversity, namely biological diversity conservation and Japan, was invited to lecture on biodiversity from the perspective the sustainable use of its components. of living creatures. The lecture was presented in an easy-to- understand manner not only for the benefit of employees, but also Overview of Biodiversity Conservation Activities the members of the general public.

Engaging in activities on the basis of two core initiatives Case The Global Environment Forum The basic philosophy of the Nippon Paper Group Charter on Study (Nippon Paper Group, Inc.) the Environment (see page 32) states that the Nippon Paper Group is committed to helping preserve the global environment Nippon Paper Group, Inc. regularly holds global over the long term and contributing to the development of a environment forums to provide opportunities for the general recycling-based society by carrying out its corporate activities in public and employees to learn about environmental issues. recognition of the importance of biodiversity. In addition, we have Over 220 members of the general public and Nippon endorsed the Declaration of Biodiversity by Nippon Keidanren and Paper Group employees participated in the 4th Global participate as a declaration promotion partner. Environment Forum held in January 2012. This particular In practicing the philosophy of our Charter on the Environment, forum was divided into we engage in initiatives involving our main businesses. In specific two distinct parts. The first terms, this entails promoting forest management that takes into portion of the forum involved consideration biodiversity and undertaking supply chain activities two lectures on biodiversity including the sustainable procurement of wood raw materials. conservation in Hokkaido and Running parallel with this initiative, we leverage the Group’s Brazil. The second portion resources and technologies. This involves protecting scarce plant featured a lecture by Mr. Hiroshi species utilizing proprietary technologies and nurturing forests for Yagyu, chairperson of the Wild the future at Company-owned forests. Bird Society of Japan, on the topic of “living with forests, Mr. Hiroshi Yagyu, chairperson of the Wild Bird Society of learning from forests.” Japan, giving his lecture

44 Nippon Paper Group Sustainability Report 2012 Initiatives Implemented in the Conduct of Our Core Biodiversity and the forest certification system Environmental Responsibility Business Activities Forest certification is an evaluation system under which Nurturing abundant forests for the future independent third-party institutions certify that companies •Forest management that takes into are properly maintaining and managing forests for the consideration biodiversity purpose of sustainably using forest resources. Measuring Nippon Paper Industries owns around 90,000 hectares of forest biodiversity conservation is a key component of the land in Japan. Together with its approximate 163,000 hectares evaluation process. of overseas plantation area, the company manages a total of Nippon Paper Industries employs forest certification Conservation Biodiversity about 253,000 hectares of forests. Managing this forest land in systems to benchmark its sustainable forest a sustainable manner while taking into consideration biodiversity management. As confirmation that the company engages conservation is one of several core corporate social responsibilities. in forest management that takes into consideration Proper planning and management are important factors in biodiversity, all of its forests both in and outside Japan have the sustainable management of forests. A considerable amount acquired certification. of time is required to cultivate trees to their maturity. In putting Moving forward, Nippon Paper Industries will work to together a viable sustainable forest management plan, it is maintain this third-party confirmation and certification therefore important to consider a wide range of factors including while practicing forest management that incorporates the areas allocated to afforestation and harvesting, the rate biodiversity concerns. of growth, the surrounding environment and the impact on society. Another factor critical to any plan is landscape concerns encompassing efforts to protect waterside forests (see page 59). •Raw materials procurement that takes into Taking full advantage of its experience as a forest management consideration biodiversity specialist nurtured over many years, the Nippon Paper Group is While taking into consideration biodiversity in the conduct of core promoting proper planning and management. business activities, the Nippon Paper Group also incorporates biodiversity conservation concerns into its supply chain •Prohibiting harvesting for the purpose of lumber management focusing mainly on the procurements of raw materials. production in environmental forest areas Procuring raw materials from sustainably managed forests Nippon Paper Industries has designated approximately 20%, or was identified under the Group’s Philosophy and Basic Policy 18,000 hectares, of forest areas owned in Japan as “environmental Concerning Raw Materials Procurement formulated in October forest areas.” In these areas, the logging of trees for the purpose 2005. In August 2006, the Group put in place an action plan for of lumber production is prohibited and the environmental functions implementing this philosophy and basic policy. of forests (forest ecosystem services) are conserved. Outside Note: Sustainable raw materials procurement activities in the context of the entire supply chain are explained in more detail on pages 56-59. of Japan, approximately 173,000 hectares, or 57%, of property held by Amapa Florestal e Celulose S.A. (AMCEL) is protected as a preservation area. Every effort is being made to incorporate •Reducing the environmental impact of biodiversity concerns by clearly identifying preservation areas. production activities Nature’s ecosystems are closely linked to a company’s business activities. In this regard, efforts to reduce the environmental impact of production activities by, for example, returning to nature the water discharged from mills in as clean a state as possible and preventing global warming by curtailing greenhouse gas emissions are vital to securing biological diversity. While recognizing its impact on the environment, the Nippon Paper Group will continue to engage in environmentally friendly production activities and reduce its environmental load.

The Company-owned Sugenuma Forest (Mount Nikko Shirane), which is designated as an environmental forest area

Nippon Paper Group Sustainability Report 2012 45 Environmental Responsibility Biodiversity Conservation

Initiatives that Harness Company-Owned Resources •Utilizing proprietary technologies (3) — restoring and Technologies tidal flat environments Nippon Paper Industries developed a new material in partnership Contributing to the protection of a variety of plant species with Fukuoka Construction K.K. by mixing granulated paper •Utilizing proprietary technologies (1) — protecting sludge ash from its Yatsushiro Mill with dredged marine and nurturing endangered species sediments. This new material was used as a tidal flat reclamation Nippon Paper Industries contributes to the protection of material in verification tests for ecosystem terrace revetment in endangered plant species through its proprietary technology for a project undertaken by a research group from the Center for cultivating cuttings in containers. After successfully propagating Marine Environment Studies of Kumamoto University led by an endangered plant species in the Ogasawara Islands in 2005, Professor Kiyoshi Takikawa. the company went on to nurture plants of the Ryukyu Islands In addition, Kumamoto University took the lead in launching on the verge of extinction. The company received samples of wide-ranging rehabilitation research for biodiversity in Yatsushiro endangered species from the Tsukuba Botanical Gardens, and Bay from fiscal 2011. This research was commissioned by successfully propagated and returned to the garden 24 of the 26 Japan’s Ministry of Education, Culture, Sports, Science and species received. Technology. The project’s aim is to establish a rehabilitation vision for Yatsushiro Bay, harmonizing environment, protection, and •Utilizing proprietary technologies (2) — protecting application concerns. The Yatsushiro Mill, owned and operated cherry tree species by Nippon Paper Industries, is developing new materials that will Nippon Paper Industries has preserved the variety of precious assist in this rehabilitation and creation. cherry trees owned by the National Institute of Genetics* located * Paper sludge is generated during the paper manufacturing process from fine fibers and other waste materials that are not made into paper. This sludge is in Mishima, Shizuoka Prefecture, since 2006. The institute owns combusted to collect heat as biomass energy. The remaining ash is referred to the precious gene resources to over 260 cherry tree species as paper sludge ash. collected from all around Japan by the late Dr. You Takenaka. For its part, Nippon Paper Industries uses its technology for cultivating •Utilizing company-owned forests (1) — Mori-to- cuttings in containers to pass on to future generations these Kami-no-Nakayoshi-Gakko (School of Friendship for precious resources. The company has, up to 2011, successfully Forest and Paper) created, returned and ultimately will pass on to future generations Nippon Paper Industries launched Mori-to-Kami-no-Nakayoshi 78 types of cherry tree plantlets. Gakko (School of Friendship for Forest and Paper), an * The Research Organization of Information and Systems National Institute of Genetics environmental education program, at the company’s own forests with a total area of nearly 90,000 hectares in 2006 (see page 97). The technique for cultivating cuttings in containers refers to: •Utilizing company-owned forests (2) — “Nurturing A technology that encourages plants to root using a Forests” for the future cultivating room characterized by an environment that As a part of efforts to pass on abundant forests to the future, the promotes photosynthesis. This method allows the Nippon Paper Group is engaged in a “Nurturing Forests” initiative propagating of plants that failed to root by cutting. under the guidance of Dr. Akira Miyawaki, of Yokohama National (1) Place the container in a cultivating room with an elevated carbon University and the world’s leading authority on forest ecology. dioxide concentration and light with suitable wavelengths to In addition to contributing to biodiversity conservation through boost the plants’ photosynthetic activities. the regeneration of indigenous forests, this initiative also aims Carbon dioxide Light Carbon dioxide to help prevent global warming and sediment disaster. We are planting trees for future use, attempting to realize Dr. Miyawaki’s concept of “forestation harmony with the economy.” The first tree planting was held in May 2010 at the company-owned Sugenuma Forest. Some 700 children and adults participated in the planting of 10,000 trees (2) Even plant species that normally fail to root by cutting are able to root. covering 25 species. In fiscal Nets erected to prevent deer 2011, further forest maintenance from feeding work was carried out.

46 Nippon Paper Group Sustainability Report 2012 Blakiston’s fish owl protection activities (Nippon Paper Industries Co., Ltd.)

Nippon Paper Industries entered into an agreement with the Wild Bird Society of Japan to protect birdlife, including Blakiston’s fish owl, in October 2010. As a part of this agreement, approximately 126 hectares of forestland owned by the company in the Nemuro region of Hokkaido was identified as a sanctuary for Blakiston’s fish owl. This sanctuary, which has to date been managed as an environmental forest area, is home to three confirmed braces of Blakiston’s fish owl. In fiscal 2011, steps were taken to collate basic bird sanctuary data obtained through surveys. Based on studies undertaken, a total of 47 species of birds were confirmed Monitoring birdlife habitats to inhabit the sanctuary. In light of these survey results, the positive effects of a rich forest environment on increasing the Blakiston’s fish owl variety of bird species attracted wide acclaim. Moreover, the Standing 70 to 80cm high and weighing period during which surveys were conducted was insufficient 3 to 4.5 kg, Blakiston’s fish owl is the world’s largest owl, with a wingspan of to cover the substantial number of large trees with a diameter 180cm. From a population of over 1,000 exceeding one meter that could potentially serve as nesting across the Hokkaido region their numbers areas for Blakiston’s fish owls. Accordingly, Nippon Paper in the wild have dwindled due to river- related construction and development. Industries plans to continue conducting surveys going forward. Today, Blakiston’s fish owls are found We will draw on the knowledge of the society through exclusively in the eastern parts of Hokkaido. joint surveys and monitoring. Utilizing their knowledge, we Confirmed numbers have diminished to will continue to engage in forest management that balances Blakiston’s fish owl around 140, making up 50 braces. (Photo provided by: Blakiston’s fish owl was identified as a economic and environmental concerns. The Kushiro Nature protected species in 1971, and placed on Conservation Office of the red list of critically endangered species Japan’s Ministry of by Japan’s Ministry of the Environment. the Environment)

Source water protection activities (SHIKOKU COCA-COLA BOTTLING CO., LTD.)

•Implementing Source Water Protection Project •Protecting watershed areas The Coca-Cola system, which is comprised of Coca-Cola Yokomine Temple mountain climbing clean-up (Japan) Co., Ltd. as well as its bottling and related companies, activities in conjunction with the green friend’s has been designed to identify water sources for plants federation of Iwane elementary school and to put in place protection plans after assessing source SHIKOKU COCA-COLA PRODUCTS’ Komatsu No. 2 Plant vulnerability. Based on these endeavors, the system entails has continued to promote Yokomine Temple mountain pushing ahead with the “Source Water Protection” Project, climbing clean-up activities in conjunction with the Iwane which in turn forms a part of the Coca-Cola group’s overall junior green friend’s federation since 2009. This is part of the water resource management project. Coca-Cola group’s “Learn from the Forest” Project to provide SHIKOKU COCA-COLA BOTTLING began identifying students with an insight into the function forests play in water water sources and to conduct vulnerability assessments at circulation. Yokomine Temple is regularly visited by pilgrims its Komatsu No. 2 and is located in an area that is a water source for the plant. Plant from 2010. In addition to clean-up These efforts have activities, students are confirmed the given lectures on the absence of any relationship between major issues with forests and water. The respect to water “Learn from the Forest” quality and volume. Project is an opportunity SHIKOKU COCA-COLA PRODUCTS CO.,LTD., Yokomine Temple mountain climbing to highlight forest Komatsu No. 2 Plant clean-up activities in conjunction with the green friend's federation of Iwane protection and a forum Elementary School to introduce key issues.

Nippon Paper Group Sustainability Report 2012 47 Environmental Responsibility Reducing Waste Generation and Final Disposal Minimizing final waste disposal through recycling and related measures

Reducing Final Waste Disposal Effectively Utilizing Waste Reducing final waste disposal Promoting the effective use of waste through the The amount of waste generated by the Nippon Paper Group development of wide-ranging applications in Japan totaled 670,000 tonnes in fiscal 2011. Of this total, The Nippon Paper Group is endeavoring to effectively use waste approximately 80% is incinerated ash (paper sludge and coal as a part of efforts to reduce the amount of final waste disposal. ash). The residual amount is comprised of sludge, wood waste Under its Green Action Plan 2015, the Group is endeavoring to and waste plastic. While the Group is working diligently to expand promote the effective use of resources in order to achieve the twin the effective use of waste as a part of efforts to reduce final waste objectives of increasing the waste recycling rate to at least 97% disposal, the amount of final waste disposal increased on a year- and recycling at least 40% of waste generated within its works. In on-year basis in fiscal 2011 due mainly to the substantial impact addition to the introduction of granulation equipment, the Nippon of the Great East Japan Earthquake. Paper Group has continued to promote such initiatives as the efficient use of ash. As a result, the waste recycling rate and the Waste generated and final waste disposal in Japan recycling rate of waste generated within works were 96.7% and (1,000 tonnes) Waste generated Final waste disposal 24.2%, respectively, in fiscal 2011. 800 682 667 631 675 666 600 The ratio of recycling to the amount of waste generated 400 Final disposal 3.3% Recycling within works 20 22 24.2% 7 3 6 7 0 2007 2008 2009 2010* 2011 (FY) * The Group was unable to compile information for the Ishinomaki and Iwanuma mills, owned and operated by Nippon Paper Industries, due to the impact of Recycling rate the Great East Japan Earthquake. Accordingly, fiscal 2009 data for each mill 96.7% was used and modified to enable a year-on-year comparison. Applications of recycled waste Promoting Proper Waste Management Waste Major Recycling Applications Cinder Raw material for cement, roadbeds, etc. Promoting management that complies with related legislation Base material for greening, raw material for Inorganic sludge The Nippon Paper Group undertakes to manage waste properly cement, etc. Organic sludge Heat recovery fuel, energy recovery, etc. in close collaboration with Group companies. Environmental Waste oil Recycled oil, energy recovery, etc. audits strictly evaluate the details of agreements concluded Energy recovery, raw material for Waste plastic with waste disposal contractors as well as manifest and other reproduction, etc. Energy recovery, recycled paper for pulp use, management from an operational perspective. Steps are also Recycled paper/broke etc. taken to ensure that notifications and waste storage facilities are Wood waste Fuel chips, etc. adequately managed in accordance with statutory and regulatory Scrap metal Raw material for metal, etc. requirements. Waste construction Reproduced crushed stones, The Company also complies with Japan’s Act for the Control material energy recovery, etc. of Export, Import and Others of Specified Hazardous Wastes and Other Wastes which is based on the Basel Convention.

Waste placement area (Fuji Mill, Nippon Paper Industries) Effectively utilizing boiler incineration ash as a construction material (right) in the paving of forest roads

48 Nippon Paper Group Sustainability Report 2012 Environmental Responsibility Initiatives to Prevent Environmental Pollution Activities aimed at reducing environmental load

Preventing Air Pollution Preventing Water Pollution Environmental Responsibility Consistently reducing emissions of NOx, SOx, soot and dust Purifying wastewater through the use of microorganisms The Nippon Paper Group has installed boilers and turbines in an In papermaking, pulp is highly diluted with water to make pulp effort to generate power internally at its paper mills. Included in slurry and then formed as a wet thin sheet. Water is removed the combustion gases emitted by boilers are nitrogen oxide (NOx) from the sheet by drying to make paper. As a result, water is an and sulfur oxide (SOx), as well as soot and dust. The Group has extremely important element in the paper manufacturing process introduced desulfurization, denitrification, dust collection, and and contains minute pulp fibers that could not be used to make other equipment and is working to reduce these contaminants to paper filler and soluble materials of wood origin. Pollution Environmental to Prevent / Initiatives Disposal Final and Generation Waste Reducing levels substantially lower than legal requirements. The Nippon Paper Group’s pulp and paper mills consistently measure the degree of pollution with such indices as COD, BOD NOx emissions in Japan and SS, and treat wastewater before it is discharged. In addition (1,000 tonnes) to ensuring that contaminated substances are held below levels 12.0 prescribed under the law, we are also implementing wide-ranging 9.6 measures to reduce water pollution even further. 7.9 7.6 8.0 7.3 6.9 Amount of water consumed / 4.0 Amount of wastewater discharged in Japan (Million tonnes) Amount of water consumed Amount of wastewater discharged 1,200 1,064 0 1,012 985 2007 2008 2009 2010 * 2011 (FY) 944 951 925 945 929 857 829 800 SOx emissions in Japan (1,000 tonnes) 4.5 400 3.8 3.8 3.4 (735) 3.1 3.3 3.0 0 2007 2008 2009 2010 * 2011 (FY)

1.5 Emissions of COD / BOD in Japan (1,000 tonnes) 0 80 2007 2008 2009 2010 * 2011 (FY) 65.9 60.3 60 53.6 55.4 Soot and dust emissions in Japan 46.7 (1,000 tonnes) 40 2.0 1.7 20 1.5 1.3 1.1 1.2 0 1.0 2007 2008 2009 2010* 2011 (FY) 1.0

0.5 Emissions of SS in Japan (1,000 tonnes) 0 30 2007 2008 2009 2010 * 2011 (FY) 24.2 21.0 20.7 20.1 20 * The Group was unable to compile information for the Ishinomaki and Iwanuma 16.5 mills, owned and operated by Nippon Paper Industries, due to the impact of the Great East Japan Earthquake. Accordingly, fiscal 2009 data for each mill was used and modified to enable a year-on-year comparison. 10

0 2007 2008 2009 2010* 2011 (FY)

* The Group was unable to compile information for the Ishinomaki and Iwanuma mills, owned and operated by Nippon Paper Industries, due to the impact of the Great East Japan Earthquake. Accordingly, fiscal 2009 data for each mill was used and modified to enable a year-on-year comparison.

Nippon Paper Group Sustainability Report 2012 49 Environmental Responsibility Initiatives to Prevent Environmental Pollution

Preventing Noise, Vibration, and Foul Odors Controlling Chemical Substances Putting in place measures to reduce the impact on areas Maintaining proper chemical substance handling in close proximity to mills management while promoting efforts to limit use •Preventing noise and vibration •PCB management Since pulp and paper mills produce large amounts of paper, Given their excellent insulating properties, PCBs have been production equipment is substantial. As long as these machines used for such electric devices as transformers. The Nippon have motors and pumps, they are a potential source of noise and Paper Group owns devices that contain PCBs at its works. vibration. In fiscal 2011, the Group received 11 complaints about Those devices that are not in use are stored in accordance with noise and one regarding vibrations. Irrespective of the existence of statutory requirements. complaints, each mill takes steps to minimize the level of noise by PCB waste is disposed of under contract in accordance with implementing such measures as the installation of sound insulation the detoxification plan put forward by the Japan Environmental facilities whenever an issue is determined to have arisen. Safety Corporation (JESCO).

The status of PCB-containing devices held (Units) Transformers / capacitors Reactors Stabilizers Number of units held 349 1 2,985

* Figures for units confirmed as held as of March 31, 2012

Before (left) and after (right) sound insulation measures have been Minimizing emissions of volatile organic implemented (Fuji Mill, Nippon Paper Industries) • compounds (VOCs) •Preventing foul odors The Nippon Paper Group is working diligently to reduce emissions When making kraft pulp, such odors as hydrogen sulfide, methyl of VOCs, widely regarded as a cause of airborne particulate mercaptan, methyl sulfide, and methyl disulfide can be generated. matter and photochemical oxidants. The Nippon Paper Group received seven complaints relating By implementing such measures as the replacement of chemicals to offensive odors during fiscal 2011. In addition to installing used, the actual amount of VOCs released into the atmosphere by equipment that seals off odors, we regularly measure odor levels Nippon Paper Industries, in fiscal 2011 was 24.6 tonnes. and conduct patrols to ensure that issues do not arise. Through these means, we are endeavoring to minimize the impact on Emission of volatile organic compounds* surrounding areas of foul odors. (Nippon Paper Industries Co., Ltd.) (Tonnes) 80 Preventing Soil Pollution 62.2 There are no instances of soil contamination at 60 Group companies. The raw materials and chemicals used by pulp and paper mills 40 39.0 37.3 34.5 contain little or no heavy metals, trichloroethylene or other soil 33.1 contaminants. By its very nature, the paper industry witnesses very 24.6 20 few incidents of serious soil contamination. There were no instances of soil contamination at Group companies during fiscal 2011. 0 2006 2007 2008 2009 2010 2011 (FY) * Amounts of less than one tonne handled have also been recorded.

50 Nippon Paper Group Sustainability Report 2012 •Responding to the PRTR Law Amounts of substances subject to the PRTR Law Environmental Responsibility The Pollutant Release and Transfer Register (PRTR) is an open handled, released and transferred and public mechanism that makes it clear how the wide variety (Tonnes) Amounts handled Amounts released Transferred 30,000 of hazardous chemical substances are handled, released and transferred at works and other facilities. The Nippon Paper Group 23,971 has continued to promote the reduction of chemical substances subject to the PRTR Law at its works in Japan. While the 20,000 18,550 amounts of chemical substances released and transferred were 17,294 17,766

17,000 Pollution Environmental to Prevent Initiatives 273 tonnes and 83 tonnes, respectively, in fiscal 2011 the Group will move forward with ongoing efforts to further reduce chemical substances subject to the PRTR Law by limiting their use through 500 replacement and other measures. 281 279 273 Nippon Paper Industries has held risk communication 224 225 meetings at its mills since fiscal 2007. Steps are taken at each 64 77 83 meeting to explain to local residents the management and use of 7 21 0 chemical substances subject to the PRTR Law. 2007 2008 2009 2010 2011 (FY)

Amounts of Substances Subject to the PRTR Law Handled, Released and Transferred1 (Fiscal 2011) Cabinet Amount Handled Order CAS No. Chemical Substance Unit (Amount Amount Amount No. Generated) Released Transferred 2 79-06-1 Acrylamide t 649 0 0 4 Acrylic acid and water-soluble salt t 962 0 0 9 107-13-1 Acrylonitrile t 733 0 0 30 n-alkylbenzenesulfonic acid and its salts (alkyl C=10-14) t 41 1 0 37 80-05-7 4,4’-isopropylidenediphenol t 122 0 0 53 100-41-4 Ethylbenzene t 2 0 0 57 110-80-5 Ethylene glycol monoethyl ether t 27 13 5 60 60-00-4 Ethylenediaminetetraacetate t 4 1 0 80 1330-20-7 Xylene t 44 1 3 84 107-22-2 Glyoxal t 3 0 0 98 79-11-8 chlorodifluoromethane t 1,580 0 0 127 67-66-3 Chloroform 2 t 314 165 30 149 56-23-5 tetrachloromethane t 31 0 31 154 108-91-8 Cyclohexylamine t 3 1 0 232 68-12-2 N,N-dimethylmethanamide t 1 1 0 240 100-42-5 Styrene t 2,669 5 0 243 Dioxins 3 g-TEQ 5 1 7 274 25103-58-6 tert.dodecanthiol t 36 0 0 296 95-63-6 1,2,4-trimethylbenzene t 40 0 5 300 108-88-3 Toluene t 2,292 72 6 302 91-20-3 Naphthalene t 484 0 0 309 Nickel compounds t 3 0 3 333 302-01-2 Hydrazine t 2 1 0 351 106-99-0 1,3-butadiene t 1,784 2 0 395 Water-soluble salts of peroxodisulfuric acid t 155 0 0 405 Boron compounds t 12 4 0 407 Poly (oxyethylene) alkyl ether (alkyl C=12-15) t 13 0 0 410 9016-45-9 Poly (oxyethylene) nonylphenyl ether t 3 0 0 411 50-00-0 Formaldehyde t 4,207 5 0 414 108-31-6 Maleic anhydride t 25 0 0 415 79-41-4 Methacrylic acid t 359 0 0 418 2867-47-2 2-(dimethylamino) ethyl methacrylate t 81 0 0 420 80-62-6 Methyl methacrylate t 43 0 0 438 1321-94-4 Methylnaphthalene t 275 1 1 455 110-91-8 Morpholine t 3 0 0 Total3 t 17,000 273 83 1 A summary of the amounts of substances handled by each Group company of one tonne or more excluding dioxins. Dioxins, nickel compounds, 1,3-butadiene and formaldehyde are designated type 1 chemical substances. 2 Chloroform and dioxins are unintentionally generated. 3 Dioxins are not included in total data.

Nippon Paper Group Sustainability Report 2012 51 Environmental Responsibility Promotion of Recycled Paper Use Contributing to the development of a recycling-based society by promoting increased use of recycled paper

Basic Stance dramatic rise in demand for paper and paperboard in China in recent years, we will continue to maintain and improve recycled Actively promoting the recycling of recycled paper paper utilizations rates going forward. The paper manufacturing industry has from an early stage In fiscal 2011, the Nippon Paper Group reported recycled promoted recycled paper recycling in efforts to use resources paper utilization rates for paper and paperboard of 39.9% and effectively. While the industry is currently promoting the 88.9%, respectively. procurement of woodchips from properly managed forests, the volume of supply is limited. Accordingly, recycled paper remains The Nippon Paper Group’s recycled paper utilization rate* an important resource. With a recycled paper collection rate of in Japan 77.9% and a recycled paper utilization rate (the percentage of (%) Paper Paperboard 90 87.8 87.8 89.2 89.1 88.5 recycled paper in the raw materials used for making paper) of 88.9 63.0%, Japan’s recycling performance is by global standards 70 extremely high. The Nippon Paper Group is working diligently to increase the 50 39.1 42.5 39.0 amount of recycled paper with the support of customers and 37.1 38.2 39.9 the general public. In addition to bolstering its recycled paper 30 processing capabilities, the Group is striving to improve the quality of pulp made from recycled paper and to increase the number 0 2006 2007 2008 2009 2010 2011 (FY) of applications. Looking ahead, we are committed to continuing * Recycled paper utilization rate = recycled paper / (recycled paper + other pulp) these efforts and contributing to the development of a recycling- based society. Case Initiatives aimed at recovering milk cartons Study (The Nippon Paper Group) Activities aimed at promoting the use of recycled paper The Nippon Paper Group is putting in place various Expanding the use of recycled paper / Developing a recycling-based society mechanisms with the aim of collecting and utilizing recycled paper in cooperation with customers. At the same time, the Group is promoting the recycling of recycled paper through Expanding recycled paper educational activities in collaboration with citizens’ groups pulp applications Promoting use and industry associations. NIPPON PAPER-PAK*, a member of the Committee Recycled paper pulp for Milk Container Environmental Issues, for example, is

Enhancing recycled paper Enhancing the quality of promoting activities consistent with the committee’s goal processing capabilities recycled paper pulp of achieving a beverage carton collection rate of at least Manufacture of recycled paper pulp 50% by 2015. Through a variety of educational initiatives as well as the exchange of information through such forums Collecting unused recycled Cooperating with local paper including residents, customers and as the Regional Conference for the Promotion of Milk confidential documents industry associations Carton Recycling and recycling workshops together with Sorting and collecting the placement of milk carton collection boxes at nationwide schools and public facilities, we achieved a paper beverage Recycled Paper Utilization Rate carton collection rate of 43.6% in fiscal 2010. Increasing rates for both paper and paperboard on a year-on-year basis Beverage carton collection rate Under its Green Action Plan 2010, the Nippon Paper Group (%) 50 43.5 43.6 identified the objective of securing a recycled paper utilization 41.1 42.6 40 37.4 rate of 50% or more. Buoyed by successful efforts to lift recycled 30 paper fibre content while maintaining quality, the Nippon Paper 19.9 20 Group reported a recycled paper utilization rate of 53.2% in fiscal 10 2010 thereby achieving its objective. 0 Under its Green Action Plan 2015 (see pages 32 and 33), 1994 2006 2007 2008 2009 2010 (FY)

which began in 2011, the Nippon Paper Group raised the * NIPPON PAPER-PAK CO., LTD., Nippon Paper Industries Co., objectives of increasing the ratio of recycled paper to paper to Ltd., Nippon Daishowa Paperboard Co., Ltd., and Nippon Paper Chemicals Co., Ltd. merged on October 1, 2012 with Nippon at least 40% and the ratio of recycled paper to paperboard to Paper Industries Co., Ltd. as the surviving company. at least 88%. Despite difficulties in procuring recycled paper in Japan due to the upswing in export activity to meet the sharp and

52 Nippon Paper Group Sustainability Report 2012 Material Procurement and Forest Responsibility

Management Approach Efforts with regard to Issues

Policy and Management 54 Sustainable Procurement of Raw Materials 56 Basic Stance 54 Basic Stance 56 Philosophy and Basic Policy 54 Promoting Procurement that Takes into

Framework for Promoting Raw Materials Consideration Environmental and Social Concerns 56 Procurement Management 54 Promoting Procurement from Plantation Timber and Certified Forests 56 Current Status of Raw Materials Procurement 55 Using Domestic Timber 58 Current Status of Paper Raw Materials Procurement 55 Promoting Overseas Afforestation 59 Acquiring Certification for Company-owned Forests 59 Protection and Cultivation of Domestic Company-owned Forests 60 Initiatives Concerning Domestic Company-owned Forests 60 Contributing to Local Communities in Overseas Afforestation Areas 62 Basic Stance 62 Overview and Location of Afforestation Areas 62 Taking into Consideration the Needs of Local Residents and Regional Cultures 63 Taking into Consideration the Natural Environment and Ecosystem Conservation 64 Stable Procurement of Recycled Paper 66 Initiatives Aimed at Stable Recycled Paper Procurement 66

Nippon Paper Group Sustainability Report 2012 53 Material Procurement and Forest Responsibility Policy and Management Practicing raw materials procurement that takes into consideration environmental and social concerns based on our philosophy and basic policy

Basic Stance Philosophy and Basic Policy Pursuing stable procurement based on sustainable Putting in place a philosophy and basic policy that reflects wood resources the opinions of stakeholders Woodchips, which are the main raw materials for pulp and paper, The Nippon Paper Group established its Philosophy and are derived from forests that are deeply intertwined with the Basic Policies Concerning Raw Materials Procurement in fiscal global environment and ecosystems. Procurement entails the 2005. In formulating this philosophy and basic policies, a draft support not only of suppliers in and outside of Japan, but also proposal was released to the public so as to solicit the opinions the communities and government authorities of local production of stakeholders in Japan and overseas. The Group took great areas. Taking into consideration the impact on the environment pains to consider the close to 2,000 comments received, and and society, the Nippon Paper Group recognizes the importance incorporated several suggestions into revisions made to the draft. of working closely with suppliers to establish a sustainable supply chain that incorporates production area forest ecosystem, local Framework for Promoting Raw Materials community, occupational safety and health as well as other Procurement Management concerns. Accordingly, we are endeavoring to build a structure and Putting in place a Group-wide oversight structure framework that will allow us to sustainably procure renewable The Nippon Paper Group established the Raw Materials wood resources. Subcommittee, chaired by the director in charge of raw materials. This subcommittee deliberates on a wide variety of issues concerning raw material procurement including the Group’s overarching procurement policy.

Philosophy and Basic Policy Concerning Raw Materials Procurement (formulated on October 5, 2005)

Philosophy We are committed to establishing a reliable raw materials procurement system through global supply chain management in consideration of the environment and society.

Basic Policy 1. Environmentally aware raw materials procurement (1) We procure woodchips, lumber and pulp from forests under sustainable forest management.* (2) We do not use and deal with illegally logged lumber and we support the eradication of illegal logging. (3) We make active use of recycled materials to help build a recycling-oriented society. (4) We make appropriate procurement of chemical substances in compliance with relevant laws and regulations. (5) We build traceability systems to ensure the above policies are practiced throughout the supply chain.

2. Socially aware raw materials procurement (1) We pursue fair deals with suppliers on equal terms. (2) We ensure that the entire supply chain has appropriate human rights and labor practices.

3. Promotion of dialogues with stakeholders (1) We engage in dialogues with stakeholders to improve the quality of our raw materials procurement in constant consideration of the environment and society. (2) We proactively disclose information so that our initiatives are better known.

* Sustainable forest management: Forestry management that not only considers economic rationality, but also environmental and social sustainability. The Nippon Paper Group defines sustainable forest management as follows: 1) Biodiversity is conserved. 2) The productivity and soundness of the forest ecosystem is maintained. 3) Soil and water resources are conserved. 4) Diverse social needs are satisfied.

54 Nippon Paper Group Sustainability Report 2012 Material Procurement and Forest Responsibility Current Status of Raw Materials Procurement In addition to actively promoting the use of recycled paper, we are procuring wood resources from sustainably managed forests.

Current Status of Paper Raw Materials Procurement Recycled paper utilization rate with respect to paper products1 (Fiscal 2011)2 Manufacturing and supplying pulp and paper products made mainly from recycled paper and wood resources The Nippon Paper Group is primarily engaged in the manufacture of paper products. 55 % of the raw materials used to make paper Other pulp (Wood resources) Recycled paper products are composed of recycled paper. The remaining 45 %

44.6% 55.4% andMaterial Procurement consists of such wood resources as woodchip which are used to Forest Responsibility produce pulp. Nippon Paper Industries is responsible for procuring wood raw materials for the Group. Around two-thirds of the wood resources required are procured from overseas and one-third 1 Recycled paper utilization rate = recycled paper / (recycled paper + other pulp) sourced from Japan. Overseas raw materials, hardwood and 2 The Group in Japan softwood, are imported mainly from the Oceania region including Australia. This area accounts for 46 % and 72 % of overseas Softwood 12.4% Procurement Materials Raw of Status / Current Management and Policy imports of hardwood and softwood, respectively. Sawmill residues, other 2.1% Non-certi ed native forests 1.3%

Non-certi ed plantations 1.9% Breakdown of wood raw materials procurement (Fiscal 2011) (Nippon Paper Industries Co., Ltd.) Certi ed plantations 7.1% Overseas 65.6% (2,984,000 tonnes) JapanOverseas 34.4% (1,565,000 tonnes)Hardwood 87.6% 2,984,000 Certi ed plantations 30.1% Hardwood Softwood HardwoodBone Softwood dry tonnes Non-certi ed plantations 57.4% 8.2% 15.3% 19.1% 41.1% (2,611,000 tonnes) (373,000 tonnes) (697,000 tonnes) (868,000 tonnes) Certi ed native forests 15.1%

(tonnes=BoneSawmill residues, Dry othertonnes) 1.3%

Breakdown of wood raw materials procured from overseas Breakdown of wood raw materials procured from Japan Softwood 12.4% Softwood 55.5% Hardwood 44.5% Sawmill residues, other 2.1% Sawmill residues, other 31.2% Certi ed native forests 0.2%

Non-certi ed native forests 1.3% Non-certi ed native forests 2.9% Non-certi ed plantations 1.9% Non-certi ed native forests Certi ed plantations 7.1% Certi ed native forests 0.2% Japan 42.8% Overseas Hardwood 87.6% 1,565,000 2,984,000 Certi ed plantations 30.1% Non-certi ed plantations Bone 20.5% Bone dry tonnes dry tonnes Non-certi ed plantations 41.1% Certi ed plantations 0.7% Sawmill residues, other 1.5% Certi ed native forests 15.1%

Sawmill residues, other 1.3%

Countries of production and species of woodchips Nippon Paper Industries Co., Ltd. procured from overseas (Fiscal 2011)

HardwoodSoftwood 55.5% Hardwood 44.5% Softwood Sawmill residues, other 31.2% 1,000 Certi ed native forests 0.2% 1,000 Country Percentage Species Country Percentage Species dry tonnes dry tonnes AustraliaNon-certi ed native forests 2.9%1,188 45.5% Eucalyptus Australia/ 270 72.4% Radiata pine Chile 453 17.3% EucalyptusNon-certi ed native forests New Zealand Certi ed native forests 0.2% Japan 42.8% South Africa 613 23.5% Eucalyptus, Acacia U.S.A. 79 21.2% Douglas fir 1,565,000 BrazilNon-certi ed plantations 251 Bone 9.6% Eucalyptus Canada 21 5.6% Spruce, Pine 20.5% dry tonnes Asia 106 4.1% Acacia Russia 3 0.8% Russian spruce / fir Certi edTotal plantations 0.7% 2,611 100.0% Sawmill residues, other 1.5% Total 373 100.0%

Nippon Paper Group Sustainability Report 2012 55 Material Procurement and Forest Responsibility Sustainable Procurement of Raw Materials Strengthening supply chain management based on the Action Plan for Wood-based Raw Material Procurement

Basic Stance incorporates checks on the legality of woodchips, allowing the Group to practice CSR procurement. This action plan also helps Focusing on legal compliance and transparency in the enhance traceability with respect to woodchips procured from procurement of raw materials overseas while placing considerable emphasis on trade association The Nippon Paper Group is a strong advocate of sustainable raw certification of the legality of woodchips produced in Japan. materials procurement that takes into consideration environmental WEB Action Plan and social concerns. In addition to legal compliance, the Group URL: http://www.nipponpapergroup.com/e/csr/ ActionPlan.html believes in sourcing from sustainable forests. Based on this understanding, we work to clearly identify the origin of timber •Confirming legality and enhancing traceability while maintaining full accountability. In procuring wood from overseas suppliers, document verifications When purchasing from external suppliers, we make every effort are performed on a vessel-by-vessel basis to ensure that the area to enhance our supply chain management capabilities, taking into where the wood was harvested and the supplier of the wood are consideration society’s needs and the environment. At the same in compliance with relevant laws, and that no illegally harvested time, we strive to develop a system that is conducive to reliable wood is included. procurement and employ third-party forest certification programs In addition, suppliers are surveyed and requested to attend to benchmark the adequacy of raw materials procurement. hearings. Every effort is made to enhance traceability while In the context of our procurement efforts from Company- confirming compliance with statutory requirements regarding owned forests, we pursue overseas afforestation projects while forest management, the species of woodchips and existence or increasing plantation timber procurement. Moreover, we practice otherwise of forest certification. Through these means, the Nippon sustainable forest management by acquiring forest certification of Paper Group strives to confirm woodchip legality Company-owned forests both in Japan and overseas. and sustainability.

Sustainable wood resources procurement •Confirming the legality of domestically produced woodchips • Sourcing from sustainable forests (sustainability) In 2006, the Law on Promoting Green Purchasing identified • Clearly identifying the origin of timber (traceability) guidelines for confirming the legality of woodchips. In specific • Maintaining full accountability (accountability) terms, the law outlined methods for confirming legality including the submission of individual harvesting and other documents. At the same time, the law provided details of the framework and management of methods for obtaining trade association certification. Nippon Paper Lumber has acquired this trade association Strengthening supply chain management certification. By collecting shipments of domestically produced timber and woodchips through this company, Nippon Paper Procuring from Procuring from Company- outside the Group owned and other forests Industries is receiving supplies of legally confirmed materials. Promoting procurement that Promoting overseas takes into consideration afforestation (see page 59) Concern for human rights, labor and environmental and social • concerns (see page 56) Acquiring certification for the local community Company-owned forests Utilizing a process of surveys and hearings, Nippon Paper Promoting procurement (see page 59) from plantation timber and Industries works to confirm its suppliers’ policies and systems certified forests (see page 57) toward human rights and labor. This process allows the company to confirm the existence or otherwise of any human rights or labor Using domestic timber relations issues. (see page 58) At the same time, a large number of suppliers is working closely with local communities through wide-ranging activities Promoting Procurement that Takes into including donations to schools and welfare facilities. Consideration Environmental and Social Concerns Strictly prohibiting purchases from illegal logging while Promoting Procurement from Plantation Timber and Certified Forests promoting procurement that takes into consideration society’s needs and the environment Procuring all imported hardwood chips from plantation The Nippon Paper Group has put in place an Action Plan timber or certified forests for Wood-based Raw Material Procurement. Based on the The Nippon Paper Group utilizes the forest certification system Group’s Philosophy and Basic Policy Concerning Raw Materials as a tool to confirm the proper procurement of raw materials. By Procurement. This action plan provides a roadmap that procuring wood resources from certified forests as raw materials,

56 Nippon Paper Group Sustainability Report 2012 the Group is positioning itself to objectively verify not only the hardwood chips procured are certified under the Programme legality, but also the sustainability of its raw materials. for the Endorsement of Forest Certification (PEFC) or Forest Against this backdrop, the Nippon Paper Group previously Stewardship Council (FSC®) schemes under its Green Action identified the objective of procuring all of the imported hardwood Plan 2015. As a result, the Group is now working to promote chips used in its pulp and paper mills in Japan from plantations or the procurement of imported hardwood chips from forests that certified forests by 2008. After meeting this goal during fiscal 2008 have acquired Forest Management (FM)* certification or Chain- according to plan, we have continued to maintain the objective of-Custody (CoC)* certification, which confirms that a risk of procuring all imported hardwood chips from plantations or assessment has been undertaken. certified forests since fiscal 2009. Currently, a large number of the Group’s suppliers have Material Procurement andMaterial Procurement

acquired CoC certification. As of December 31, 2011, 97% of Forest Responsibility Imported hardwood chips by type the total volume of imported hardwood chips handled comprised (Nippon Paper Industries Co., Ltd.) either PEFC or FSC® certified materials. (%) Tree Farm Initiative plantation Other plantations Certi ed native forests Non-certi ed native forests * FM and CoC Certification 100 8 4 The forest certification system ostensibly comprises the Forest Management 22 26 20 17 29 31 (FM) component, which certifies that forests are responsibly managed, and the 80 25 Chain-of-Custody (CoC) component, which certifies that products from certified

15 forests have been properly processed and distributed. Sustainable Procurement of Raw Materials 60 Under the FM certification system, a third party certifies that the management 58 57 51 57 of forests is being undertaken in a sustainable manner based on various 40 51 56 53 objective benchmarks including (1) compliance with regulatory requirements and system frameworks, (2) maintenance and conservation of forest 20 ecosystems and biodiversity, (3) respect for native and local resident rights, and 22 26 12 11 14 18 17 (4) maintenance and improvement of forest productivity. 0 CoC certification is a system covering all operators engaged in the 2006 2007 2008 2009 2010 2011 2012 (FY) production, processing and distribution of timber materials. In addition to (Estimate) certifying that products (certified woodchips) are managed, based on the standards set out in the forest certification system in all processes including Procuring imported hardwood chips from production, processing and distribution, CoC certification confirms that a risk • assessment of all non-certified woodchips has been undertaken. Products certified forests display a certification mark in the event that all operators have acquired CoC After achieving the above-mentioned objective, the Nippon Paper certification across all processes. Group established the new objective of ensuring that all imported

Overview of major forest certification programs Forest certification programs entail third-party confirmation that forests are being managed in a sustainable manner. Programs are designed to certify the performance of forest products, promote their selective purchase and support sound and continuous forest management.

Certification Program Name [Characteristics] Details and Features Performance Certification Evaluation of the quality and status of forests Forest Stewardship Council (FSC®) FSC® is a non-profit international members-based organization that employs A global forest certification program 10 principles to certify responsible forest management. FSC® has adopted the CoC certification system. Programme for the Endorsement of Forest Certification (PEFC) PEFC bases its sustainability benchmark on a broad consensus expressed A program that promotes mutual recognition of the forest certification in intergovernmental processes and guidelines. It provides a mutual programs of individual countries recognition system that endorses the interchangeability and compatibility of the responsible forest management systems of individual countries. Launched across various countries in Europe, the program encompasses the forest certification programs of 34 countries around the world. In similar fashion to FSC®, PEFC has adopted the CoC certification system. Examples of certifications mutually recognized by PEFC. Sustainable Forest Initiative (SFI): North America (U.S.A./Canada) Canadian Standard Association (CSA): Canada Finnish Forest Certification System (FFCS): Finland Australian Forestry Standard (AFS): Australia CERTFORCHILE: Chile Sustainable Green Ecosystem Council (SGEC) SGEC certifies forest management in terms of both an abundant natural A forest certification program established in Japan environment and continuous lumber production. SGEC engages in an evaluation based on seven criteria and 35 benchmarks while taking into consideration Japan’s natural environment as well as its social customs and culture. SGEC has adopted the CoC certification system.

Nippon Paper Group Sustainability Report 2012 57 Material Procurement and Forest Responsibility Sustainable Procurement of Raw Materials

Using Domestic Timber of initial plans. In fiscal 2011, the rate of domestic timber utilization rose to 34.4%. Moving forward, the Nippon Paper Group will Actively utilizing domestically produced timber while continue to actively promote the use of domestic timber and to contributing to the prevention of forest deterioration contribute to the revitalization of Japan’s timber industry. After World War II, Japanese cypress and Japanese cedar trees were aggressively planted in Japan, requiring thinning Domestic timber utilization rate 1 (Nippon Paper Group) and other maintenance to ensure healthy growth. Due mainly (%) The Nippon Paper Group’s domestic timber utilization rate Japan’s wood self-suf ciency rate (calendar year)2 to sluggish lumber prices, which continue to place downward Pulp and chip wood self-suf ciency rate3 40 36.9 pressure on industry profits, and the inadequate maintenance 34.4 34.7 34.4 of many plantations, there are major concerns regarding forest 30.4 28.9 30.2 30 31.6 30.2 deterioration. In order to address these concerns, it is important 29.2 28.5 both to rejuvenate Japan’s forest industry through the use of 27.8 26.0 26.6 20 24.0 domestic timber, and to create a virtuous afforestation, cultivation 22.6 and logging cycle. In this context, the Japanese government 10 announced its Forest and Forestry Revitalization Plan in 2009. Under this plan the government has identified the goal of lifting the 0 nation’s wood self-sufficiency rate from its current level of 24% to 2007 2008 2009 2010 2011 2012 (FY) (Estimate) 50% over the next decade. 1 Sawmill residues at timber mills in Japan are included in domestic timber For its part, the Nippon Paper Group had identified the target utilization rate calculations. Source: Supply and Demand of Lumber issued by the Forestry Agency of Japan of raising its domestic timber utilization rate to 30% by fiscal 2010. 2 3 Source: Year book of paper and pulp statistics issued by the Ministry of The Group then achieved this target in fiscal 2008 well in advance Economy, Trade and Industry of Japan

Case Actively promoting the use of domestic timber Study (Nippon Paper Lumber Co., Ltd.)

Nippon Paper Lumber is responsible for collecting of domestic timber for Nippon Paper Industries. The company also sells a Nippon Paper Lumber receives an award in the Great wide range of products including timber for residential use and East Japan Earthquake Reconstruction Special Category of the 2012 Wood Products Use Campaign building materials procured both in Japan and overseas. With “Ki-zukai Undo” its network of domestic timber collections in Japan, and its ability to handle a comprehensive lineup of products, Nippon The Japanese Forestry Agency’s wood products use campaign Paper Lumber is actively developing its domestic timber “Ki-zukai Undo” aims to revitalize mountain villages and to business. In fiscal 2011, the company handled approximately create healthy forests through the use of domestic timber. 530,000 m3 of domestically produced materials, and ranked Nippon Paper Lumber received an award in the Great East second in its field in Japan (see figure). The company aims to Japan Earthquake Reconstruction Special Category of the lift this figure to 1,000,000 3m , and, to this end, is developing 2012 “Ki-zukai Undo” Campaign recognizing the company’s new applications while working to further boost exports. efforts to supply and expand the use of domestic timber. Following the earthquake, there were concerns that the Domestic timber sales results by product type operations of timber and woodchip mills serving the Tohoku (Nippon Paper Lumber Co., Ltd.) region would be severely disrupted. However, Nippon Paper （1,000 m3） Logs Lumber Laminated wood Lumber was able to ship woodchips intended for the Tohoku 600 562.1 529.3 region to other areas, avoiding the need to shut down 472.4 462.8 operations. The award reflected the wide acclaim for the company’s efforts to continue operations, as well as the stable 400 380.2 supply of reconstruction materials following the disaster.

200

0 2007 2008 2009 2010 2011 (FY) Loading operations at Letter of commendation Ishinomaki Port

58 Nippon Paper Group Sustainability Report 2012 Promoting Overseas Afforestation The afforestation cycle Trees are systematically planted in accordance with annual plans Nurturing renewable wood resources under the guidance and harvested for use after significant growth. After harvesting, of the Tree Farm Initiative steps are taken to regenerate forests through replanting as well as Guided by its Charter on the Environment (see page 32), the coppicing, (the growth of new trees from the shoots that sprout Nippon Paper Group is protecting and nurturing forests in from stumps). In repeatedly implementing this cycle, we gain the and outside Japan while taking into consideration biodiversity benefit of access to a permanent source of forests. concerns. We are also pushing through this policy even within Moving forward, we are also cultivating hardwood chip the confines of the Tree Farm Initiative and efforts to promote resources through recycling-based forest management. Material Procurement andMaterial Procurement overseas afforestation. Forest Responsibility In similar fashion to the cultivation of crops in the field, the Tree 0 year (11th year) 10th year Harvesting in the 1st year Farm Initiative achieves sustainable raw materials procurement by Harvesting previous scal year growing as many trees as are harvested and used each year. 9th year Afforestation areas came to 163,000 hectares as of the end of Harvesting in the 2nd year 2011. Under its Environmental Action Plan (Green Action Plan 2015) following scal year (see page 33), the Nippon Paper Group has identified the target of Sustainable Procurement of Raw Materials increasing overseas afforestation areas to 200,000 hectares. 8th year 3rd year

Afforestation projects that help the local ecology 7th year 4th year The Nippon Paper Group conducts afforestation projects 6th year 5th year on grasslands, reclaimed farms and pastures and on

plantation timber harvested areas. We select species 10-year harvesting cycle focusing mainly on Eucalyptus globulus by country according to individual climactic conditions and materials Acquiring Certification for Company-owned Forests available for making paper. Eucalyptus trees are known for their quick growth. In order to maintain a balance Acquired certification of all Company-owned forests in between the planting of fast-growing, highly profitable trees and outside of Japan and the biodiversity needs of each region, we implement The Nippon Paper Group employs third-party forest certification appropriate measures and ensure that our trees are programs, and has continued to promote the acquisition of forest

not planted along rivers and water courses where the certification for all Company-owned0 年 目（ 11年目） forests. potential effects on the ecology are large. For example, All Company-owned10年目 forests前年度伐採 in Japan were certified until in 1年目 over half of the property held by Brazil-based AMCEL is fiscal 2007 (see page伐採 61). After acquiring FSC® forest certification protected as a conservation area. In addition to soil erosion for AMCEL in Brazil in December 2008, Nippon Paper Industries countermeasures and the monitoring of water quality, every completed9年目 its objective of obtaining certification of all Company- 次年度伐採 2年目 effort is being made through joint surveys with universities owned forests overseas. Looking ahead, we intend to maintain and research institutes to protect the natural vegetation this certification status while continuing to engage in forest and wildlife. management that takes into consideration society’s needs and the environment.8年目 3年目

Status of overseas afforestation business forest certification acquisition 7年目 4年目 Overseas plantation project Certification Date of (by operating company) system name acquisition 6年目 5年目 WAPRES (Australia) AFS September 2004 Tree planting that preserves riparian VTP (Australia) AFS May 2005 forests. The blue area indicates PTP (Australia) AFS June 2006 riparian forests. BTP (Australia) AFS April 2006 SEFE (Australia) AFS October 2006 Volterra (Chile) CERTFORCHILE December 2007 Forestco (South Africa) FSC® April 2003 AMCEL(Brazil) FSC® December 2008

Nippon Paper Group Sustainability Report 2012 59 Material Procurement and Forest Responsibility Protection and Cultivation of Domestic Company-owned Forests Maintaining a focus on forest management that takes into consideration the characteristics of each region in an effort to promote sound afforestation

Initiatives Concerning Domestic Company- health and conservation of forests, managing forest resources in owned Forests an appropriate manner is of vital importance to the Nippon Paper Group. In recognizing the multifaceted role that forests play within Practicing appropriate forest management at Company- society, we are working to maintain forest management integrity. owned forests over an area approaching 90,000 hectares With Company-owned forests spread across 400 nationwide Nippon Paper Industries owns approximately 90,000 hectares of locations from Hokkaido in the north to Kyushu in the south, we company forest in Japan. Accordingly, the company is the second are practicing sustainable forest management that takes into largest owner of forests in the private sector. consideration the characteristics of each region. As a corporate group whose existence is closely tied to the

Distribution of Company-owned forests in Japan and composition by species (Nippon Paper Industries Co., Ltd.)

• All Company-owned forests have acquired certification (see page 61)

• Approximately 20% of Company-owned forests are maintained as environmental forest areas (see page 61) • The Nippon Paper Group has established a bird sanctuary within its Company-owned forests and • Approximately ¥0.8 billion is allocated each year to the maintenance is working closely with the Wild Bird Society of of Company-owned forests (see page 61) (Hokkaido) Japan to help protect Blakiston’s fish owl (see page 47)

• The Group engages in forest management that takes into consideration biodiversity (see pages 45 and 61)

• Launched a “Nurturing Forests for the Future” tree planting initiative for the general public (see page 46)

• Supports the activities of the Shirane-aoi Preservation Group (see page 98)

• The School of Friendship for Forests and Paper held within Company-owned forests to provide hands-on courses on the natural environment Hardwood 1% Other 5% (see page 97) Sugenuma Forest Other softwood 3% Native forests 54% (Gunma Prefecture) Japanese larch 4% Harwood 42% Japanese cypress 6%

Spruce, fir 9%

Japanese cedar 9%

Toyono Forest Pine 9% Spruce, fir 9% (Kumamoto Prefecture) Forest plantations 41% Other softwood 3%

Distribution of Company-owned forests by prefecture Number of Company- Area Number of Company- Area Number of Company- Area Prefecture Prefecture Prefecture owned Forests (hectares) owned Forests (hectares) owned Forests (hectares) Hokkaido 53 43,580 Shizuoka 54 2,677 Shimane 17 2,851 Aomori 7 294 Gifu 2 233 Yamaguchi 26 1,457 Akita 12 693 Kyoto 16 279 Tokushima 2 244 Iwate 29 6,541 Mie 1 3 Ehime 1 319 Miyagi 16 1,675 Nara 2 795 Kochi 1 146 Yamagata 10 498 Hyogo 4 286 Fukuoka 2 53 Niigata 1 350 Wakayama 2 230 Oita 10 702 Fukushima 14 1,074 Okayama 1 58 Kumamoto 58 5,737 Gunma 1 4,915 Hiroshima 9 721 Miyazaki 25 9,235 Yamanashi 8 1,615 Tottori 1 168 Kagoshima 15 2,563 Total 400 89,991 Note: As of March 31, 2012

60 Nippon Paper Group Sustainability Report 2012 •Certification acquired for all company-owned forests •Forest management that takes into in Japan consideration biodiversity Nippon Paper Industries has acquired forest certification from the Nippon Paper Industries places considerable emphasis on Sustainable Green Ecosystem Council (SGEC) for all company- the conservation of biodiversity. In this context, the company owned forests in Japan. undertakes various activities including the acquisition of forest SGEC is a forest certification system unique to Japan (see certification and the establishment of environmental forest areas. page 57). It guarantees the sustainable management of forests At the same time, equal weight is given to protecting riparian by preserving the wide-ranging functions of forests including forests and surrounding landscapes. watershed forest protection and biodiversity conservation while Moreover, onsite personnel carry their own red data books Material Procurement andMaterial Procurement taking into account the Japanese climate and conditions. listing scarce wildlife throughout each region. Through this and Forest Responsibility It also evaluates the level of continuous forest management. other means, every effort is made to help preserve biodiversity. The forests owned by Nippon Paper Industries have received SGEC certification acknowledging the company’s efforts to Biodiversity data for Company-owned forests in Japan engage in forest management that takes into consideration (As of March 31, 2012) (1,000 hectares) biodiversity and the natural environment of each region. Moving Ratio of IUCN Commercial Environmental Percentage Environmental forward, the company will take all necessary measures to maintain Categories Forest Area Forest Area Total Share Forest Area to

Total Area Forests Company-owned Domestic of Cultivation and Protection this certification. Strict nature reserve / I wilderness 0 0 0 0% — •Establishing environmental forest areas area Nippon Paper Industries makes a clear distinction between II National park 0.6 4.5 5.1 6% 88% Natural commercial forest and environmental forest areas, and engages III monument 0 0 0 0% — in forest management appropriate to the specific characteristics Habitat / species of each area. Approximately 80% of all company-owned forests IV management 0 0 0 0% — area are designated as commercial forest areas. In addition to the Protected production of lumber, these areas are managed in a manner that V landscape / 2.5 0.7 3.2 4% 22% seascape fully recognizes the surrounding environment and the attributes of Managed resources each area. Harvesting for the purpose of lumber production is not VI protected 0 0 0 0% — area undertaken within environmental forest areas. Every effort is made Not applicable 68.6 13.1 81.7 91% 16% within environmental forest areas to maintain those functions Total 71.7 18.3 90.0 100% 20% inherent in forests including the protection of ecosystems and the WEB The Japan Committee for IUCN website conservation of waterways. Environmental forest areas account URL: http://www.iucn.jp/english.html for approximately 20% (18,000 hectares) of company-owned International Year of Forests Initiatives forests in Japan. Within this area, certain forests including Initiated by the United Nations, the International Year of Akan and Nikko have been Forests 2011 sought to raise awareness on the importance designated as national parks, of sustainable management, conservation and sustainable Environmental forest area (Hokkaido) providing a sanctuary to large development of all types of forests. Many countries around numbers of plants and animals. the world, including Japan, engaged in a wide range of activities in this pivotal year. •Maintaining company-owned forests in Japan With its deep connection to forests, the Nippon Paper Nippon Paper Industries allocates approximately ¥0.8 billion Group is actively engaged in activities that support the each year to the maintenance and management of company- International Year of Forests. The Group continues to owned forests in Japan. This entails such wide-ranging activities promote a variety of measures aimed at protecting forests. as weeding, pruning and thinning. Although not currently These include environmental education activities including economically viable because of the stagnant price of domestic the School of Friendship for Forests and Paper conducted timber, Nippon Paper Industries has continued to benefit and grow using Company-owned forests and the through the appropriate application of forests and forest products, establishment of a sanctuary for the and is committed to balanced, sustainable forest management protection of Blakiston’s fish owl (see that allows forests to fulfill their multifaceted functions. page 47). In linking these efforts with the International Year of Forests, the Group is endeavoring to raise awareness toward the importance of forests.

Nippon Paper Group Sustainability Report 2012 61 Material Procurement and Forest Responsibility Contributing to Local Communities in Overseas Afforestation Areas Fostering positive ties with local communities built on harmonious coexistence and mutual prosperity

Basic Stance discussions regarding the protection and use of native forests. We are committed to promoting afforestation activities that expand Developing an afforestation business that contributes to afforestation resources in Australia. the local community Recognizing the importance of mutual growth and development •South Africa the Nippon Paper Group strives to build positive ties with the The history of afforestation in South Africa, one of the world’s local communities in close proximity to its forest areas. We pay leading countries in this field, began in the late 17th century with the particular attention to the concerns of local residents while taking planting of conifers (pines). Since 1975, the Nippon Paper Group into consideration the cultures and traditions of each region has imported woodchips from South Africa. as well as the natural environment and ecosystems. We work diligently to contribute to society through a variety of endeavors. •Chile Considerable effort is placed on promoting education activities The afforestation of radiata pines and eucalyptus has been actively and creating employment opportunities. undertaken in Chile since the mid-20th century. At 2,320,000 hectares, afforestation areas account for 3% of the nation’s total Overview and Location of Afforestation Areas land area (at the end of 2009). The forest products from the area are exported to countries around the world and play a vital role in Managing 163,000 hectares of forest land in four countries supporting Chile’s economy. Afforestation in Chile comprised the The Nippon Paper Group manages 163,000 hectares of forest land Nippon Paper Group’s first project under the Tree Farm Initiative. in the four countries of Australia, South Africa, Chile and Brazil. (see page 59)

•Australia •Brazil Australia is a country rich in forest resources. With a highly With its vast land area, Brazil is recognized worldwide for its rich developed lumber industry, it is the world’s premier exporter of forest resources and highly developed lumber industry. As a nation woodchips used in the manufacture of paper. that continues to enjoy firm economic growth, significant progress The Nippon Paper Group began importing natural is being made in the development of infrastructure essential to hardwood chips from Australia at the start of the 1970s. Today, afforestation management. The Nippon Paper Group purchased approximately 50% of its woodchips are imported from Australia AMCEL, a company engaged in such wide-ranging activities (see page 55). At the same time, the Group actively participates in as the production and export of woodchips, and is managing substantial forest land. Overview of plantation companies Australia Company Name Ownership Nippon Paper Resources Wholly owned subsidiary of Nippon Paper Industries Australia Pty. Ltd. (NPR) Co., Ltd.

WA Plantation Resources Joint-venture company established by Nippon Paper Pty. Ltd. (WAPRES) Industries Co., Ltd., and Marubeni Corporation

South East Fibre Exports Joint-venture company established by Nippon Paper Pty. Ltd. (SEFE) Industries Co., Ltd., and ITOCHU Corporation

Brazil Company Name Ownership Joint-venture company established by Amapá Florestal e Nippon Paper Industries Co., Ltd., Celulose S.A. (AMCEL) and Marubeni Corporation

Chile

South Africa Company Name Ownership Company Name Ownership Joint-venture company established by Volterra S.A. Nippon Paper Industries Co., Ltd., Joint-venture company Sumitomo Corporation and Mitsui Forest Resources established by Nippon Paper O.S.K. Lines, Ltd. Ltd. (Forestco) Industries Co., Ltd., Sumitomo Corporation and BayFibre

62 Nippon Paper Group Sustainability Report 2012 Case Respect for indigenous people Taking into Consideration the Needs of Local Study Residents and Regional Cultures (Volterra S.A., Chile) Placing the highest priority on communication while Residing in the southern region of Chile, the indigenous contributing to society Mapuche people have long upheld and treasured their While placing the highest priority on communication with society, traditions and culture. As a part of its afforestation the Nippon Paper Group maintains the utmost respect for management activities, Volterra S.A. has endeavored to Material Procurement andMaterial Procurement regional cultures and traditions as a part of efforts to promote ascertain the presence of sacred sites. Every effort is made Forest Responsibility harmonious coexistence. to preserve important legacies and to allow the indigenous Mapuche people to visit and utilize sites of historic significance within forests held by the company. Case Fostering locally produced products in partnership Study with local communities (Volterra S.A., Chile)

Case Participating in a program that donates seedlings Volterra S.A. appoints a designated officer to serve as a Study to farmers (Volterra S.A., Chile) Areas Afforestation Overseas at Communities to Local Contributing point of contact for the local community. In addition to fielding requests from neighboring residents, particular care Volterra S.A. is an active participant in a program initiated is taken to balance afforestation business promotion and by an alliance between Corporación Chilena de la Madera regional development needs. (CORMA) and the corporate sector. Under this program, After supporting the efforts of a neighboring village to five million seedlings of pine and eucalyptus are being newly cultivate locally produced raspberries, Volterra S.A. donated to farmers over a five-year period. In addition to participated in celebrations with local residents following the licensing of technology, the goal of the program is to the initial harvest in 2011. provide rural areas with a source of income and to restore Working closely with another neighboring village, the land exhausted by soil erosion. The company has donated company also assisted in efforts to manufacture folk eucalyptus seedlings each year since 2005 and provided handicrafts 16,000 seedlings in 2012. including baskets and trinket boxes Case Supporting plans to increase the number of made from Study available nursing home buses (AMCEL, Brazil) locally produced wicker cane. Amapa Florestal e Celulose S.A. (AMCEL) is located in With neighboring residents following the initial harvest of raspberries Santana City, State of Amapá. Among a host of social issues, the city continues to confront a dearth of public buses suitable for people with disabilities. As a result, a great many people continue to face difficulties in traveling. Case Communicating with regional societies Study (Volterra S.A., Chile) In addition to the prohibitive costs of using taxis, safety and security issues continue to plague transportation. Volterra S.A. delivers gifts to local elementary school In an effort to address these issues, Japan’s Ministry students at Christmas each year as a part of efforts to of Foreign Affairs is promoting plans, as part of its interact with local communities. The children in particular development assistance program, to provide buses for look forward to this annual event. use by Casa da Hospitalidade (nursing home facilities). As a joint private- and public-sector endeavor, AMCEL is providing its full cooperation and has donated a bus configured specifically for disabled persons use. Local elementary school students Interested persons in front of the bus receiving gifts donated by AMCEL

Nippon Paper Group Sustainability Report 2012 63 Material Procurement and Forest Responsibility Contributing to Local Communities at Overseas Afforestation Areas

Case Engaging in employment support activities for Case Providing a venue for charity picnic races Study people throughout the region Study (BTP, Western Australia) (AMCEL, Brazil) BTP, which has been contracted to manage the afforestation AMCEL is conducting employment as well as job of Eco Tree Farm Pty. Ltd., a joint-venture company owned education and training in conjunction with local industry, 70% by Osaka Gas Co., Ltd. and 30% by Mitsui & Co., commerce and vocational schools at the request of the Ltd., provides a portion of the company’s plantation area Amapá provincial and city governments, and the national free of charge as a venue for charity picnic races for three and regional communities. Each year, the company is a days each year. Over 500 people participated in the picnic major sponsor of such education programs as the Escola races hosted by charitable organizations, which in 2012 da Madiera (lumber school)1 and Youth Project2, open marked the 39th time the event was held. The proceeds to young people and the collected are donated to children suffering from disabilities economically disadvantaged. due to accidents or illnesses as well as local fire brigades. These programs have been The organizers held annually since 1998 in of the event and Santana (where AMCEL’s local residents head office is located), Porto are extremely Grande (where AMCEL has appreciative of an operational office) and BTP’s gesture Tartarugalzinho (where AMCEL in providing this Practical training in lumber has a seedling nursery). Over Charity picnic races held in a portion of the venue each year. processing at the Escola da 2,000 people have participated company’s forest area Madiera (lumber school) in the programs.

1 Escola da Madiera (lumber school) A school designed to teach techniques in processing wood materials including furniture making Taking into Consideration the Natural Environment 2 Youth Project and Ecosystem Conservation This project is designed to teach participants a trade as mechanics, hairdressers and related positions Helping to conserve the ecosystem through biodiversity and water quality research The Nippon Paper Group has acquired forest certification at all of Case Putting in place fire protection teams at its afforestation areas and practices forest management that takes Study afforestation companies into consideration the environment. Among a host of endeavors, (WAPRES, BTP, Western Australia) the Group conducts research on biodiversity and water quality with the aim of protecting the ecosystem. Afforestation companies in southwest Western Australia In addition, we engage in environmental and related education have formed their own fire brigades to address the activities for the benefit of young children and students in an effort vital issues of bushfires. As members of this group, to promote harmonious coexistence with the region. WA Plantation Resources Pty. Ltd. (WAPRES) and the Bunbury Treefarm Project (BTP) have acquired firefighting Case Undertaking ecosystem research within company- equipment including fire trucks. Regular coordination Study owned natural forests meetings and joint training are held each year. Plans are (Volterra S.A., Chile) in place to participate in full-fledged fire-fighting drills and training organized by specialist departments of the Volterra S.A. has commenced research into the Western Australian government including the Department ecosystems of flora and fauna in the natural forests present of Environment and within company-owned properties in conjunction with the Conservation and the University of Concepcion. The approximate 5,000 hectares Fire and Emergency of natural forests within areas owned by Volterra S.A. Services Authority. are home to many wild plants and animals. This not only Particular emphasis is includes rare flora and fauna, but also several endangered being placed on building species. Working with specialists in various fields, the close cooperation with company is conducting academic studies. In addition to its government-affiliated monitoring activities, Volterra S.A. is actively promoting the Fire brigade on standby during a fire specialist agencies. integrity of ecosystems within forests.

64 Nippon Paper Group Sustainability Report 2012 Case Conducting biodiversity research Case Conducting biodiversity research Study (AMCEL, Brazil) Study (Portland Treefarm Project (PTP), Australia)

Approximately 176,000 hectares, or 55% of the 317,000 Under the Portland Treefarm Project, a joint undertaking hectares of property held by AMCEL, is protected as a between Nippon Paper Resources Australia Pty. Ltd. conservation area. The company is working diligently to (NPR); Mitsui Bussan Woodchip Oceania Pty. Ltd. (MWO), maintain the ecosystem of plants and animals that inhabit owned and operated by Mitsui & Co., Ltd.; and Australian the area. AMCEL has also installed equipment to monitor Afforestation Pty. Ltd. (AAP), a joint-venture company water levels and quality throughout its afforestation areas. established by Toyota Motor Corporation and Mitsui & Material Procurement andMaterial Procurement

The company regularly conducts water surveys in an effort Co., Ltd., biodiversity surveys have been conducted every Forest Responsibility to protect water quality and aquatic organisms. Among three years since 2005. In the event that individual surveys a host of other initiatives, AMCEL ensures that a large identify rare wildlife, steps are taken to confirm the status portion of its property is protected as a conservation area of ecosystems and then to implement protection measures each year. This area then forms a part of the natural wildlife as required. These measures include supplementing areas program run by the Brazilian Institute of Environment and with indigenous vegetation, putting in place conservation Renewable Natural Resources. areas, and undertaking appropriate activities to ensure

Cooperating with the Department of Biological Sciences ecosystem maintenance. Areas Afforestation Overseas at Communities to Local Contributing at the Federal University of Para, AMCEL conducted a survey for mammals in the company’s afforestation and surrounding areas in 2010. From 2011and throughout 2012, the company continues to conduct a savanna vegetation survey in cooperation with Universidade Federal Rural da Amazonia. In addition, Left: Swamp flax-lily (Dianella callicarpa) an ongoing record is being Right: Southern pygmy perch (Nannoperca australis) Undertaking surveys kept of wildlife sightings.

Case Adopting agroforestry techniques Study Case Providing opportunities for local high school (Nippon Paper Resources Australia Pty. Ltd. (NPR), Australia) Study students to participate in practical outdoor ecology studies in afforestation areas NPR has adopted agroforestry techniques in its efforts to (South East Fibre Exports Pty. Ltd.(SEFE), Australia) cultivate trees and other agricultural products together with livestock on the same land. In March 2012, year 11 students from Bombala High School NPR began sheep farming in its afforestation areas at undertook an ecological survey in the afforestation areas the end of 2005 (approximately 320 head of sheep as of owned by SEFE. As a part of the survey, research was August 31, 2012). We started to sell wool and livestock conducted into the Hairy Anchor (scientific name: Discaria in 2006. Sheep grazing can help to reduce the amount of pubescens) grown and protected in the area by SEFE. herbicides and the risk of forest fires. Sheep excrement Records were taken on the status and progress of growth. is also an excellent fertilizer helping to cut back the use of chemical substitutes. Collectively, sheep grazing has contributed to NPR’s efforts to engage in sustainable afforestation activities.

Hairy Anchor and local high school students participating in outdoor studies Sheep grazing on forest land

Nippon Paper Group Sustainability Report 2012 65 Material Procurement and Forest Responsibility Stable Procurement of Recycled Paper Balancing Group-wide supply and demand through uniform management at the Group’s head office

Initiatives Aimed at Stable Recycled •Balancing supply and demand at all mills through Paper Procurement uniform head office management The Nippon Paper Group’s consumption of recycled paper Promoting stable procurement and increased use of reached 2,910,000 tonnes in 2011. On an annual basis, this recycled paper by accurately grasping supply and accounted for approximately 17% of the total consumed by demand trends Japan’s paper industry as a whole. Taking this into consideration, The collection of recycled paper has taken on greater importance securing sufficient volumes of recycled paper is therefore vital to with each passing year. This is attributable not only to government ensuring the stable supply of pulp and paper products. initiatives aimed at reducing the volume of waste, but also to Recycled paper, on the other hand, is a material that occurs in measures designed to promote the recycling of resources. a variety of formats including used newspapers, magazines and Recycled paper is an essential resource accounting for more than cardboard boxes. It is not a material specifically designed for 60% of the raw materials used by Japan’s paper industry. production and therefore its supply cannot be easily managed. Against this backdrop, the Nippon Paper Group has continued Accordingly, the abilities to balance supply and demand of to adopt a stable procurement stance nurtured over many years recycled paper with a high degree of accuracy, and to efficiently in conjunction with the recycled paper industry. In this manner, the collect required volumes, are critical to maintaining stable recycled Group has promoted the stable procurement of recycled paper, paper utilization. recognized it as the starting point for recycled paper recycling. The Nippon Paper Group identifies the status of supply and demand focusing on the amount of recycled paper required for •The current status of recycled paper production at each of its mills at five nationwide locations. Trends After recording historic highs in 2009, Japan’s recycled paper are then managed on a uniform basis by the head office of Nippon collection and RP utilization rates contracted slightly to 78.1% and Paper Industries. In this manner, steps are taken to ensure a 63.0%, respectively, in 2011. In recent years, demand for recycled stable and balanced supply to each mill, taking into consideration paper and particularly recycled paper for use in paperboard has the Group as a whole. grown in China. This has in turn impacted the price of recycled paper in Japan. •Maintaining high stock capacity to support stable supply Recycled paper collection and recycled paper utilization Maintaining sufficient storage space to accommodate fluctuations rates in Japan in the amount of recycled paper generated is essential to the (%) Recycled paper collection rate Recycled paper utilization rate stable procurement of large volumes of recycled paper. Working to 80 74.5 75.1 79.7 address fluctuations in the amount of recycled paper generated, 78.2 78.1 75 72.4 the Nippon Paper Group maintains storage space equivalent to 70 around 80% of its monthly consumption. 65.4 65 62.5 63.0 63.1 60 61.4 61.9 59.6 60.6 55 2002 2006 2007 2008 2009 2010 2011 (Year) Source: Paper Recycling Promotion Center

Volume of recycled paper exported from Japan (1,000 tonnes) Cardboard Newspapers Magazines Quality paper Other 6,000 5,000 4,914 4,374 4,433 Recycled paper stockyard 3,887 3,844 4,000 3,710 3,491 (Yatsushiro Mill, Nippon Paper Industries) 3,000 2,835 2,000 1,000 0 2004 2005 2006 2007 2008 2009 2010 2011 (Year) * January to December annual totals

62.5

66 Nippon Paper Group Sustainability Report 2012 Customer Responsibility

Management Approach Activities of Nippon Paper Crecia Co., Ltd. 74 Business and Product Features and Policy and Management 68 Basic Stance toward Customers 74 Basic Stance 68 Product Safety Management System 74 Philosophy and Basic Policy 68 Providing Relevant Product Information 74 Product Safety Management System 68 Responding to Customers 75 Verification and Audit of Recycled Paper 69 The Stable Supply of Products 75 New Product Development that Reflects Customers’ Needs 75 Efforts with regard to Issues Activities of Nippon Paper Papylia Co., Ltd. 76 Activities of Nippon Paper Industries Co., Ltd. 70 Business and Product Features and Basic Stance 76 Business and Product Features and Basic Stance 70 Product Safety Management System 76 Product Safety Management Structure 70 Product Safety Initiatives 77 Approach toward Product Safety 70 The Stable Supply of Products 77 The Stable Supply of Products 70 Responding to Customers 77 Responding to Customers 70 New Product Development that Reflects Customers’ Needs 77

Product Development that Address the Needs of Customers 71 Activities of SHIKOKU COCA-COLA Activities of Nippon Daishowa Paperboard Co., Ltd. 72 BOTTLING CO., LTD. 78 Business and Product Features and Basic Stance 72 Our Approach to Business and Products 78 Product Safety Management System 72 Coca-Cola Operating Requirements (KORE) Management System 78 Product Safety Initiatives 73 Initiatives Aimed at Enhancing Customer Satisfaction 79 The Stable Supply of Products 73 Environmentally Friendly Products and Packages 79 Responding to Customers 73 Product Development that Address the Needs of Customers 73 Development of Environmentally Friendly Products 80 Basic Stance 80 Environmentally Friendly Raw Materials Procurement 80 Environmentally Friendly Production 80 Environmentally Friendly Utilization 81 Environmentally Friendly Handling after Use 81 Environmentally Friendly Disposal 82

Nippon Paper Group Sustainability Report 2012 67 Customer Responsibility Policy and Management In addition to the stable supply of products that are essential to society including paper, we continue to pursue levels of quality and safety that meet the expectations of customers.

Basic Stance As a part of efforts to achieve this goal, we formulated the Philosophy and Basic Policy on Product Safety in October 2004 Providing products and services that benefit society and are endeavoring to win the trust of customers through the The Nippon Paper Group’s business activities are grounded in the development and provision of socially useful and safe products supply of paper. In this manner, we have continued to develop and services, a key component of our underlying Action Charter and grow in tune with society. Extending our horizons beyond (see page 22). paper and paper products, we also engage in a broad spectrum of activities including the manufacture and sale of chemical Product Safety Management System products, timber and construction materials. Our customer base is equally wide ranging encompassing both the corporate sector Putting in place a Group product safety management system and individuals. The Nippon Paper Group Product Safety Committee, chaired by The Nippon Paper Group recognizes that the stable supply of the General Manager of Nippon Paper Group, Inc.’s Technology, paper and related products is a source not only for winning the Research and Development Division oversees all activities trust of customers, but also for fulfilling its responsibility to society, concerning product safety. The committee, which is made up of securing a steady stream of earnings and returning profits to its the general managers of related departments within Nippon Paper many stakeholders. Group, Inc. and the general managers responsible for product With this in mind, we will work to secure the highest product safety at each Group company, deliberates on and determines and service quality as well as reliability while endeavoring to important matters concerning product safety policies and activities. take into consideration such critical concerns as environmental Reporting directly to the Product Safety Committee, the conservation across the entire product life cycle. Product Safety Subcommittee monitors and manages the status of activities at each Group company. Drawing on information Philosophy and Basic Policy and the exchange of opinions among Group companies, the subcommittee also deliberates on the optimal response to matters Winning the trust of our customers of concern. The results of these deliberations are then submitted The Nippon Paper Group has positioned “winning the trust of to the Product Safety Committee. Each Group company its customers” at the heart of its Corporate Vision (see page 22). establishes its own product safety committee and engages in appropriate product safety activities. Philosophy and Basic Policy on Product Safety (established on October 1, 2004) Product Safety Management System

Philosophy Group We pledge to work to improve safety at every stage of the Product Safety Committee life cycle of our products, from design to manufacture, Chairperson: General Manager of Nippon Paper Group, Inc.’s Technology, supply, and disposal, and to provide products and services Research and Development Division Constituent members: General managers of related departments within that the public can trust. Nippon Paper Group, Inc. and general managers responsible for product safety at each Group company Basic Policy 1. To provide safe products and services in response to the Product Safety Subcommittee continued trust of our customers. 2. To respect related laws and standards in order to guarantee the safety of our products and services. Group Companies (14 ) 3. To provide customers with precise information on the * safety, features, and correct usage of our products. Product Safety Committees 4. To set up a product and service safety management structure and ensure that all Group employees have a * Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Co., Ltd, Nippon Paper Crecia Co., Ltd., Nippon Paper Papylia Co., Ltd., SHIKOKU thorough awareness of the importance of product safety. COCA-COLA BOTTLING CO., LTD., NIPPON PAPER-PAK CO., LTD., Nippon Paper Chemicals Co., Ltd., Nippon Paper Lumber Co., Ltd., KOYO PAPER MFG. CO., LTD., Kitakami Paper Co., Ltd., Nippon Seitai Corporation, NP Trading Co., Ltd., Nippon Paper Development Co., Ltd., Akita Jujo Chemicals Co., Ltd. (As of March 31,2012)

68 Nippon Paper Group Sustainability Report 2012 •Acquiring quality management system certification Verification and Audit of Recycled Paper Each Group company actively promotes efforts aimed at acquiring ISO 9001 certification, the international standard for quality Implementing appropriate operating processes while management. Group companies that had acquired certification as undergoing inspections by third-party institutions of October 1, 2012 are presented as follows. In January 2008, the Nippon Paper Group notified the public that it had been manufacturing certain recycled paper products with Acquisition of ISO 9001 certification (As of October 1, 2012) lower-than-standard recycled pulp content while at the same time Company Name Mill/ Manufacturing Companies/Works misrepresenting that content. In the ensuing period, the Group Nippon Paper Industries took ongoing steps to thoroughly investigate the causes of these Nakoso Mill Co., Ltd. issues and to formulate and implement recurrence prevention Akita Mill, Soka Mills, Ashikaga Mill, Yoshinaga Paperboard Division measures. Moreover, during dialog with stakeholders in 2009, Mill, Otake Mill we were encouraged to continue our endeavors regarding Gotsu Works*, Iwakuni Works, Chemical Division Higashimatsuyama Works, Yufutsu Works accountability including full disclosure. Nippon Paper Crecia In order to promote continuous improvement, Nippon Paper Tokyo Mill Co., Ltd Industries is currently undergoing third-party audits of its operating Nippon Paper Papylia procedures from both the procedural performance (validity and Harada Mill, Suita Mill, Kochi Mill Co., Ltd compliance) perspective and the systems (management and

SHIKOKU COCA-COLA PRODUCTS CO., Customer Responsibility SHIKOKU COCA-COLA review) perspective. LTD. Komatsu No. 2 Mill, SHIKOKU BOTTLING CO., LTD. CUSTOMER SERVICE CO., LTD. SGS Japan Inc., a third-party inspection and certification Nippon Seitai organization, conducted performance audits of the Group’s Hokkaido Works, Maebashi Mill, Saitama Mill Corporation operating processes from the receipt of orders through production Four business sites at headquarters NIPPON PAPER to shipment between 2008 and 2011. For the period in question, (construction, electricity, control systems, UNITEC CO., LTD. SGS Japan confirmed that the Group’s content ratio management plant engineering) Headquarters, Yufutsu Department, Shiraoi system continued to operate without problem. Plans are in place Kokusaku Kiko Co., Ltd. Management and Policy Department, Asahikawa Department for this organization to conduct similar audits in 2012. NANKO UNYU CO., LTD. The standards and criteria of the ISO 14001 environmental Nippon Paper All departments management system have been incorporated into production Ishinomaki Technology (Electric Component Department, Machinery procedures at each of the Group’s mills. Within the confines Co., Ltd. Department, Construction Department) of this system, steps are being taken to manage and review Graphic Arts Headquarters, Mill, Marketing Division Communication production procedures. Headquarters, Concrete Research Center, In addition, the Nippon Paper Group undergoes inspections FLOWRIC CO., LTD. Nagoya Mill by customers based on the verification system formulated by the N&E Co., Ltd. Japan Paper Association. Customers check that the production Australian Paper Maryvale, Shoalhaven, Preston processes and recycled pulp contents at mills conform to * Nippon Paper Chemicals’ Gotsu Works has gained certification for specific regulations. Moving forward, the Group will continue to implement product types. prevention measures and to pursue their ongoing improvement while accurately grasping the needs of society. •Responding to instances of defective products In instances where a problem with one of the Group’s products has come to light, the Quality Assurance Department of the relevant Group company will take the lead in coordinating with the appropriate mill and related head office departments to promptly and accurately address each issue. In the event that a problem is perceived or determined as warranting urgent and serious attention, each Group company takes the appropriate action in An audit by SGS Japan accordance with its Product Safety Crisis Management Manual.

Nippon Paper Group Sustainability Report 2012 69 Customer Responsibility Activities of Nippon Paper Industries Co., Ltd. Strengthening its quality management system in an effort to deliver products and services that fully satisfy customers

Business and Product Features and Basic Stance Approach toward Product Safety Placing particular emphasis on the stable supply and Promoting product safety initiatives in strict compliance environmental friendliness of products with statutory and regulatory requirements Nippon Paper Industries manufactures paper, which is sold Guided by the Product Safety Committee, Nippon Paper mainly to corporate customers, including newspaper, publishing Industries’ mills and research laboratory ensure that chemical and printing companies. The company’s products cover a wide substances are used and managed in accordance with ISO spectrum of uses such as newsprint, publication paper, business 14001. At the same time, steps are taken to comply with all communication paper and packaging paper. In 2011, Nippon statutory and regulatory requirements including the Act on the Paper Industries maintained a 23% share of domestic production. Evaluation of Chemical Substances and Regulation of Their This represented a drop of around 3% year on year due to damage Manufacture and the PRTR Law. Turning to base materials used from the Great East Japan Earthquake. However, all damaged in the production of food containers, the company conforms to plants had resumed operation by August 2012, with production the Food Sanitation Act as well as industry standards. volume continuing to increase over the ensuing period. The company is working diligently to earn the trust of customers by The Stable Supply of Products placing the utmost emphasis on ensuring the stable supply of safe and reliable products. Putting in place an industry-wide paper supply system to At the same time, Nippon Paper Industries is focusing ensure the uninterrupted issue of newsprint in increasingly on producing environmentally friendly paper products emergency situations as interest in products that reflect environmental concerns Demand is particularly high for the stable supply of paper used in continues to grow. such highly public information media as newspapers. As a result, the paper industry prepares emergency manuals by region for use Product Safety Management Structure when an extraordinary incident occurs. In the event of a disruption to communication and transportation systems as a result of a Promoting efforts to strengthen companywide quality major disaster, paper companies follow this manual to ensure the systems focusing on quality, speed and service smooth supply of newsprint.

•Quality management system Nippon Paper Industries maintains a nationwide manufacturing network of eight mills (as of April 2012). Each mill has put in place its own quality management system. The Quality Assurance Department oversees the quality of all products. Due to the wide range of products, companywide quality meetings are held regularly by item. The company’s head office, mills and laboratories work in unison to promote quality enhancement measures. Shipping products from a warehouse

•Responding to instances of defective products Responding to Customers The Quality Assurance Department takes the lead in responding to customer inquiries and instances of defective products. In Calling for and responding to the opinions and the event that a major incident occurs as a result of one of requirements of customers through sales and marketing the company’s products, the Quality Assurance Department activities as well as regular customer visits acts swiftly to resolve any and all issues in collaboration with Nippon Paper Industries supplies newsprint, printing and relevant departments. Nippon Paper Industries has put in place publication paper and business communication paper largely to a system to ensure that information relating to accidents and corporate customers. Sales representatives call on customers to the appropriate company response is relayed immediately to the solicit their opinions and needs. At the same time, the company responsible director and the president. This information is also has introduced a service engineer system in an effort to close channeled by the Quality Assurance Department to each mill and the gap between customers and the production frontline. Under relevant in-house department. this system, technical staff engaged in the production of paper

70 Nippon Paper Group Sustainability Report 2012 and acting as service engineers regularly call on customers. In Industries acquired certification at its headquarters as well as its witnessing firsthand the printing process through such initiatives Ishinomaki and Iwakuni mills. The Shiraoi Works of Hokkaido Mill as “Quality Patrols,” service engineers directly solicit feedback and the Fuji Mill were certified in October 2007 with the Yatsushiro from customers conveying this information to all related in-house Mill certified in March 2010. departments including the production frontline. This is in turn The Suzukawa Office of Fuji Mill, the Yatsushiro Mill, the leading to accurate and timely improvements in product quality. Nakoso Mill and the Yufutsu Works of Hokkaido Mill acquired CoC certification from the Forest Stewardship Council (FSC®), an international organization engaged in the certification of forests similar to PEFC, in January 2003, April 2007, December 2007 and October 2009, respectively.

Status of CoC certification acquisition PEFC FSC Acquisition Acquisition Office Office Date Date Regular visit at a printing factory by a service engineer December Headquarters January 2003 Headquarters 2004 Fuji January 2003 Framework for addressing customer inquiries, Ishinomaki March 2007 (Suzukawa) Customer Responsibility complaints and claims Iwakuni March 2007 Yatsushiro* April 2007 Customers Hokkaido December October 2007 Nakoso (Shiraoi) 2007 Information Fuji October 2007 Hokkaido received Report October 2009 Yatsushiro March 2010 (Yufutsu) * FSC CoC certification currently suspended Sales and marketing Regular visits * As of September 30, 2012

Notification Documented report Activities of Nippon Paper Industries Co., Ltd. •New products that use high-bulk technologies Quality Assurance Department, Service engineers Taking full advantage of its proprietary high-bulk technologies, Nippon Paper Industries develops new products that meet the Request for Report of needs of its customers. In April 2012, the company launched b7 further study study results Report Research laboratory BULKY, a new product in the b7 series. This series uses Nippon Paper Industries’ unique bulking technology to produce well- Mills textured coated paper that achieves low base weight yet high paper thickness. The newly launched b7 BULKY is produced Product Development that Address at Ishinomaki Mill. As for features, b7 BULKY is a matt paper in the Needs of Customers a simple white with a 92% brightness level and offers superior shelf life thanks to its wood-free paper base. Compared with the Providing products leveraging inherent strengths existing b7 TRANEXT, the core brand in the b7 series, b7 BULKY achieves greater softness due to its even lower density. Moreover, •PEFC and FSC® certified paper b7 BULKY is available in a wide range of base weights to enable Nippon Paper Industries acquired Chain-of-Custody (CoC) its use across various applications including magazines and books. certification (see page 57) under the Programme for the Suffering the full brunt of the tsunami following the Great Endorsement of Forest Certification Schemes (PEFC), an East Japan Earthquake, operations at the Ishinomaki Mill were internationally recognized forest certification system (see page 57). suspended. This led to substantial interruptions in the stable At the same time, Nippon Paper Industries was the first Japanese supply of products. Thanks largely to the tireless efforts of all company to establish a comprehensive PEFC-certified paper company personnel, Paper Machine 8 was brought back into production system from chip procurement through manufacture to service in September 2011. Thereafter, Nippon Paper Industries sale in 2007. The company’s Raw Material & Purchasing Division directed its energies to the parallel tasks of reconstruction and first obtained PEFC-CoC certification for the import of woodchips stable product development. Due to these dual endeavors, the in December 2004. At the end of March 2007, Nippon Paper company was able to successfully launch b7 BULKY.

Note: Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Co., Ltd., NIPPON PAPER-PAK CO., LTD., and Nippon Paper Chemicals Co., Ltd. merged on October 1, 2012 with Nippon Paper Industries Co., Ltd. as the surviving company. This section provides details of the activities of Nippon Paper Industries Co., Ltd. as of September 30, 2012.

Nippon Paper Group Sustainability Report 2012 71 Customer Responsibility Activities of Nippon Daishowa Paperboard Co., Ltd. Providing reliable transportation and packaging materials for food, beverage, electrical and electronic device, pharmaceutical and other wide-ranging applications

Business and Product Features and Basic Stance Product Safety Management System In addition to its mainstay cardboard base paper, the Providing safe products and services that comply with all company provides a vast array of safe and high-quality relevant statutory and regulatory requirements as well as paper products. industry standards Nippon Daishowa Paperboard has a network of five mills in Nippon Daishowa Paperboard participates in the Nippon Paper Japan, dedicated to the paperboard business. Every effort is Group Product Safety Committee. The company supplies made to engage in efficient and fast-paced management while products and services that comply with all relevant statutory and bolstering the company’s competitive prowess on the world regulatory requirements, as well as industry standards. stage. In addition to its mainstay paperboard business, which Nippon Daishowa Paperboard places particular emphasis on includes cardboard base paper, and coated duplex board, Nippon strengthening mechanisms that guarantee and certify recycled Daishowa Paperboard also pursues business opportunities across paper fiber content ratios, and compliance with the Law on a variety of fields including coated, business communication Promoting Green Purchasing as well as the purchase of lumber paper and pulp. In calendar year 2011, the company held a from tree thinning. Another priority is the promotion of safety 14.1% share of the paperboard market in Japan. surveys regarding the paper and paperboard used in food Nippon Daishowa Paperboard strives to provide high-quality packaging. The company follows a predetermined recycled paper safe and environmentally friendly products and services to meet fiber and non-wood fiber pulp content ratio verification process the needs of customers and to earn their trust. In addition, based on the system established by the Japan Paper Association. the company works diligently to provide accurate and open Nippon Daishowa Paperboard has also put in place guidelines for information, including descriptive quality labeling. onsite customer inspections to verify recycled paper fiber content. Each of the company’s five nationwide mills has acquired ISO Calls for increasingly stringent, international safety and hygiene 9001 certification. standards for paper and paperboard products used in food containers and packaging are becoming more pronounced in recent years. The paper industry formulated its own voluntary standards for paper and paperboard intended to come into contact with food in 2007. Nippon Daishowa Paperboard closely follows

Major Products Product Category Details Product Category Details Cardboard base paper, which includes linerboard and Color board is commonly used for general-purpose corrugating medium, is a product that entails the active packaging and writing materials. Chipboard is used as use of recovered paper. Through the application of Color board, a general-purpose packaging, mat board, interlining cutting-edge technologies that deliver such chipboard and other material and has a wide variety of product environmental benefits as increased energy efficiency, packaging uses including pharmaceutical and products are manufactured in a manner that reduces confectionary boxes. environmental impact. After processing, products are Cardboard used in wide-ranging fields, including the transportation SIKRA PAK, a highly water-resistant paperboard, was base paper and packaging of groceries, beverages and electric and developed as a flagship product in the company’s electronic devices. In addition, and in the context of specialty paperboard product range. Recovered recent efforts to reduce greenhouse gas emissions, container board is the principal raw material for SIKRA demand for lightweight, high-intensity base paper has PAK, and as such it can be recycled as a paper product steadily grown. Nippon Daishowa Paperboard, is working Specialty after use. SIKRA PAK has a variety of applications and to address this demand by delivering products that meet paperboard can be used in sheet palettes, returnable containers, diverse needs, including superior safety, bonding, marine product packaging, election campaign boards working, printing, water resistance and repellency. and concrete panels. As an alternative to such mainstream materials as wood and foam polystyrene, Coated duplex board is a paper product comprising SIKRA PAK is also attracting wide acclaim for its several laminated layers. Products vary according to environmentally friendly, lightweight and combination of raw materials used for each layer. recycling properties. Taking full advantage of the latest technologies, Nippon Daishowa Paperboard, offers an abundant product Core paperboard is used in a variety of rolled containers Coated lineup that is used in the publishing, food, for storing and transporting paper, cloth, film, drawings, duplex board confectionary, pharmaceutical, daily necessity and other certificates of merit and related items. Harnessing wide-ranging fields. In 2010, the company commenced Core paperboard technologies developed over a lengthy period, the sales of both sides coated duplex board rebirth 70 company’s core paperboard products are (PEFC), a product that uses both recycled pulp and manufactured with an emphasis on strength and certified forest pulp and is compliant with the Law on precision for long-term, reliable use. Promoting Green Purchasing. Nippon Daishowa Paperboard manufactures a variety Gypsum board is used as a water-resistant construction of products for printing, book, office, drawing and material most commonly applied to walls and ceilings. It packaging use. Brands include the high-quality paper is made by pouring gypsum between two sheets of Paper Nichirin A, high-quality lightweight-coated paper base paper. The gypsum board base paper COSMO AIR LIGHT, book paper manufactured by Nippon Daishowa Paperboard, offers Kohaku, rough cream Kohaku and new chiffon cream, Gypsum board outstanding adhesive, water absorbability, dimensional machine-glazed paper Hakuto and machine glazed base paper stability and other properties. Due to its consistent high bleached Capital Wrap. quality, this product is attracting wide acclaim from customers. Boasting a broad spectrum of material and texture features, the company’s gypsum board base paper lineup offers considerable flexibility according to each application and design.

72 Nippon Paper Group Sustainability Report 2012 these voluntary standards and the policies outlined regarding particular attention to product labeling. production and details of prohibited chemical substances. In the event of an earthquake or similar disaster, the company has established a backup system that entails coordination Product Safety Initiatives between mills. This serves to minimize any impact on the company’s operations. Attending to each issue through a variety of measures including close-knit technological cooperation, while Responding to Customers providing comprehensive and pertinent information •Providing pertinent product information Maintaining a system to address instances of product The intended application is an essential factor in selecting the defects and customer inquiries appropriately base paper for use in paper processed products. Amid the implementation of increasingly stringent safety and hygiene •Responding to instances of defective products requirements, customers are also placing greater emphasis on Details of product claims are channeled through sales the reduction of both costs and greenhouse gas emissions. At the representatives to the Customer Service Department. The same time, calls for more robust base paper with a lower base Department then contacts the appropriate officer within each mill weight have become especially strong for use in cardboard boxes to ascertain the cause of the claim and to discuss appropriate Customer Responsibility that serve a multitude of purposes, including transportation. In an countermeasures. A written report is prepared for the customer. effort to address these needs, Nippon Daishowa Paperboard is both evaluating and manufacturing new base papers. In addition System for responding to defects, claims, requests for to providing information regarding processing and utilization consultation and inquiries methods to customers, the company is also offering cooperation Customers (including general consumers) and support from a technological perspective, which includes Report (members of the

Information Report Activities of Nippon Daishowa Paperboard Co., Ltd. Customer Service invitations to view first-hand processing procedures. Department and mills to Statutory requirements relating to the use of chemical Sales agent accompany sales staff when delivering substances in products differ depending on the application. At the reports to Information Report customers as and same time, there is a growing number of companies implementing when required) voluntary standards with respect to acceptable chemical substances Sales and Marketing Division in each field. The need to assess and confirm compliance is Noti cation Written report becoming increasingly vital. Nippon Daishowa Paperboard has appointed a designated officer to oversee the company’s efforts in Technical & Engineering Division / Customer Service Department accurately and promptly addressing these needs. Request for Report on the results investigation of investigation

Mills The Stable Supply of Products Promoting stable supply and precise information based on systematic production Product Development that Addresses the Needs of Customers

The paperboard products manufactured by Nippon Daishowa Nippon Daishowa Paperboard engages in the development Paperboard are essential to a broad spectrum of fields including of products that meet wide-ranging needs the packaging and distribution sectors. In order to address the needs of such end users as soft In addition to a procurement structure that ensures high- drink manufacturers, who continued to call for lighter weight quality, safe and reliable raw materials and fuels, Nippon Daishowa container board made from recovered materials, Nippon Paperboard has put in place facility maintenance systems Daishowa Paperboard developed a base weight reduction to secure continuous and systematic production. Through method. Employing this method, the company has been these systems, the company is endeavoring to fully address successful in reducing the volume of resources used as well the needs of its customers by providing high-quality, safe and as its environmental impact. Looking ahead, Nippon Daishowa environmentally friendly products on a stable basis. Every effort is Paperboard will continue to promote methods that reduce the also made to ensure product information is accurate and open. base weight of container board in an effort to upgrade and Among a host of initiatives, Nippon Daishowa Paperboard pays expand its lineup of environmentally friendly products.

Note: Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Co., Ltd., NIPPON PAPER-PAK CO., LTD., and Nippon Paper Chemicals Co., Ltd. merged on October 1, 2012 with Nippon Paper Industries Co., Ltd. as the surviving company. This section provides details of the activities of Nippon Paper Industries Co., Ltd. as of September 30, 2012.

Nippon Paper Group Sustainability Report 2012 73 Customer Responsibility Activities of Nippon Paper Crecia Co., Ltd. Concentrating on customers’ perspectives in the development of easy-to-use products while strengthening the product safety management system

Business and Product Features and Basic Stance Product safety management system Roles of the Product toward Customers Product Safety Committee Safety Committee •Deliberate on Leveraging our position as a manufacturer to support clean Chairperson: important in-house General Manager, Technical & Engineering Division matters relating to and comfortable lifestyles Committee members: product safety Nippon Paper Crecia provides individual consumers with General Affairs Dept., Material Procurement Dept., •Identify trends in Production Dept., Technology Dept., Product Development product-related household paper products including facial and toilet tissues as Dept., Marketing Div., Consumer Products Sales Div., legislation and monitor the status of well as health, nursing and toilet care products. The company also Professional Products Sales Div., End User Sales in-house compliance Promotion Div., Intellectual Property Dept. offers professional products which are mostly for business use. •Exchange information with Through such brands as Kleenex®, Scottie® and Poise®, Nippon Group companies Paper Crecia has attracted a popular following in personal care Quality Assurance Group (Secretariat) and hygiene products. Providing safe and high-quality products is part and parcel •Responding to instances of defective products of the company’s efforts to deliver a clean and comfortable The Quality Assurance Group serves as the point of contact for lifestyle to its customers. In order to supply products of an even all instances of defective products. While coordinating with the higher quality, Nippon Paper Crecia listens to its customers and company’s head office, relevant mills as well as the sales and engages in research and development that focuses on addressing marketing, distribution and all other appropriate departments, the customer needs. Quality Assurance Group addresses each incident in a proper and timely manner. In addition to collating all appropriate information, Product Safety Management System the Quality Assurance Group formulates countermeasures after determining the degree of urgency and severity. An emergency Striving to address customer concerns in a proper and countermeasures task force, made up of executive management timely manner while further enhancing quality and the general managers of all relevant departments, is established In addition to acquiring ISO 9001 certification at its Tokyo Mill in for incidents that are considered extremely urgent and severe. February 2009, Nippon Paper Crecia has incorporated ISO 9001 procedures into its quality management system. Providing Relevant Product Information The company has established the Product Safety Committee in order to engage in product safety risk management. Ensuring proper labeling, advertising and information Complementing this initiative, the Customer Service Office was disclosure in accordance with statutory requirements relocated adjacent to the President Office. By ensuring that Nippon Paper Crecia adheres strictly to all relevant statutory and customer claims are conveyed directly to the president, Nippon regulatory requirements including Japan’s Household Goods Paper Crecia is reinforcing its crisis management framework. Quality Labeling Act and the Law for Preventing Unjustifiable Extra In March 2012, the Quality Assurance Department was or Unexpected Benefit and Misleading Representation, as well placed within the Marketing Division and positioned as the Quality as industry standards. In this manner, the company takes steps Assurance Group of the Product Development Department. to prevent erroneous labeling and advertising that may lead to With this initiative, the company has put in place a system that misrepresentation. In addition, the Sales and Marketing Division’s is not only deeply involved from the product design process, but Intellectual Property Department and the Quality Assurance Group is also capable of promoting product safety risk management play a central role in both monitoring and verifying the accuracy throughout each stage of the product life cycle from development of product labeling and advertising, while the Customer Service through production to shipment in a timely and effective manner. Office deals directly with inquiries relating to the features of each In addition, the Quality Assurance Group takes the lead in product and how products are used. Complementing each of the implementing safety audits at each mill while also conducting aforementioned measures, the company has established a page inspections to confirm quality at OEM companies. Through these on its website to explain its products and field inquiries. and other means, Nippon Paper Crecia is working to ensure increased product quality and stability.

Explanations and details of products posted on the company’s website

74 Nippon Paper Group Sustainability Report 2012 Responding to Customers Framework for handling customer inquiries, complaints and claims Responding sincerely to ensure that customers are Customers (general consumers, sales agents, retailer, etc.) fully satisfied Flow of information received Report Contact details for the Customer Service Office are displayed (inquiries, complaints, etc.) Flow of information received on all products. This helps customers to more easily direct their (inquiries, complaints, etc.) Report Sales and Marketing concerns to the company and to address any instances of Flow of information received Record of (inquiries, complaints, etc.) Report defective products. The company’s website is also configured to information received accept customer queries and comments. Nippon Paper Crecia In-house database* Customer Service Of ce consistently acts in good faith whenever its products are a cause for customer inconvenience. Every effort is made to ensure that All department (in principle) Quality Assurance Group Information customers are fully satisfied. disclosure Request for Meeting to Technical & Engineering investigation Report address complaints Division, Marketing Department, Product All mills, outsourcers Development Department Investigation support Note: The recording of information received in the company’s in-house database

is strictly handled in accordance with the company’s rules on the Customer Responsibility management of personal information.

The Customer Service Office The Stable Supply of Products

Basic philosophy and policies toward addressing Supplying safe products through a nationwide network of customer claims four mills Both facial and toilet tissues are items that are essential to daily life. Basic Philosophy toward Addressing Nippon Paper Crecia maintains a nationwide products network Activities of Nippon Paper Crecia Co., Ltd. Customer Claims of four mills located in Saitama, Kanagawa, Shizuoka and Kyoto. Nippon Paper Crecia gives the highest priority to Each mill takes great pride in delivering products that engender addressing customer claims in a sincere and timely peace of mind. The company also maintains an emergency manner. The company takes seriously the comments of network in the event of an earthquake or other natural disaster. its customers which are consistently reflected in efforts to improve products and services. New Product Development that Reflects Customers’ Needs Basic Policies 1. The company positions efforts to address customer Developing high-quality, easy-to-use products claims as one of its highest priorities. In response to customer needs, Nippon Paper Crecia engages 2. The company maintains a deep respect for the interests in product development activities that focus on enhancing both of customers when addressing each claim. quality and added value. At the same time, the company pays 3. Drawing on the collective strength of the organization as equal attention to ease-of-use and environmental concerns. a whole, the company takes full responsibility until each For those products that are difficult to carry home or bulky, customer claim is resolved. Nippon Paper Crecia has established an online shopping site. The company is taking steps to upgrade and expand its 4. Each claim is addressed without prejudice and in an lineup of online products. open and fair manner irrespective of the details offered by the customer. Select Products 5. Every emphasis is placed on statutory compliance with unreasonable requests handled in a resolute manner. 6. Recognizing that customer comments are an invaluable source for improving the quality of its products and services, the company listens intently to the voice of its customers. Scottie® 12-roll Kleenex® tissues Acty brand fuss-free 7. Every effort is made to stringently protect the personal pack (double) AQUAVeil Accordion- pull-up pants information of customers. Type Pocket Tissues M-L (16 pants) (4-pack)

Nippon Paper Group Sustainability Report 2012 75 Customer Responsibility Activities of Nippon Paper Papylia Co., Ltd. Addressing diverse needs and winning the trust of customers by establishing a system that can accommodate high-mix, small-lot production, delivering highly functional, quality products and ensuring stable supply

Business and Product Features and Basic Stance Companywide technology and quality meetings are held each month to deliberate on issues relating to production technology Responding to diverse customer needs through a flexible and quality assurance. With a shared understanding, Nippon Paper production system Papylia continues to operate its quality assurance system. Building on its craftsmanship nurtured over many years, Nippon Paper Papylia handles a variety of specialty paper products in the •Ensuring product safety management in accordance thin paper field. The company’s product lineup includes cigarette- with statutory requirements and industry standards related paper, thin printing paper, back carbon copying paper and Nippon Paper Papylia has formulated a Product Safety Charter. processing base paper. In addition to its paper making technologies Guided by this charter, the company maintains and promotes that use a mix of wood pulp, non-wood pulp and synthetic fibers, comprehensive product safety, taking into consideration product Nippon Paper Papylia boasts such diverse processing techniques features and disposal with a view to protecting the global as impregnation, coating, thermal and crepe processing, as well environment as well as operating safety. Included in the charter as embossing. Drawing on these technologies and techniques, the are the company’s product safety policies. These policies provide company continues to develop and market a vast array of unique, specific guidelines for the direction and implementation of product highly functional and specialty papers. safety activities. Nippon Paper Papylia places customers’ needs at the The Product Safety Committee has been established to help heart of its operating activities. To this end, production lines are promote appropriate activities. This committee puts forward and designed with the utmost care, focusing on operating reliability promotes proposals while managing progress. The committee as well as the flexibility to accommodate high-variety, low-volume also oversees the proper use and management of chemical production. Through advanced automation, the company is substances and raw materials at mills and research laboratories. well positioned to efficiently produce high-quality products on a In this manner, every effort is made to ensure that the company stable basis. At the complies with all relevant statutory requirements including the Act same time, Nippon on the Evaluation of Chemical Substances and Regulation of Their Paper Papylia places Manufacture, etc., and the PRTR Law. With respect to such food considerable weight wrapping products as greaseproof and tea filter paper, Nippon on efforts to improve Paper Papylia engages in production that conforms to the Food its delivery capabilities. Sanitation Act and industry voluntary standards. Specialty paper As a member of the Nippon Paper Group, Nippon Paper Papylia is conscious of its role in society. In this context, the Major Products of Nippon Paper Papylia Co., Ltd. company shies away from any activity that would betray society’s Major Product Category Details trust. In adhering strictly to compliance through appropriate Cigarette paper, filter plug wrapping training, Nippon Paper Papylia is endeavoring to raise awareness Cigarette-related paper paper, filter tipping paper among directors and employees. India paper, paper for lists of stipulations, Thin printing paper paper inserts, ultra-lightweight coated printing paper, bulky paper Product Safety Policies (Formulated on June 30, 1995, and revised on April 1, 2004) Back carbon copying paper Back carbon copying paper Processing base paper Releasing base paper, waxed base paper 1. The company positions the pursuit of safety at the Water-soluble paper, absorbent paper, heart of its basic business philosophy. To this end, the oilproof paper, waterproof paper, facial Functional and company has established and continues to observe tissues, various filter papers, heat sealable specialty paper paper, tape base paper, specialty printing specific product safety standards that help prevent the paper, wiper paper distribution of defective products. 2. With the underlying goal of maintaining and pursuing product safety, the company draws on the collective Product Safety Management System strength of its technological capabilities and strives diligently to prevent any injury or inconvenience to its Standing at the forefront of the paper industry, Nippon customers as a result of a defective product. Paper Papylia has acquired ISO 9001 certification and is 3. To achieve this goal, the company strictly manages strengthening its quality assurance system. product safety. Stringent measures are taken to Taking the industry lead in quality, Nippon Paper Papylia acquired confirm product safety as a part of efforts to improve new product development, quality and processes. ISO 9001 certification at its Suita Mill in 1992. The company then The company also closely monitors product safety to took steps to acquire certification at its Harada and Kochi mills, ensure that appropriate standards are maintained. putting in place a robust companywide quality assurance system. 4. The company supplies its customers with safe products while steadfastly providing information to ensure that standards are maintained.

76 Nippon Paper Group Sustainability Report 2012 Product Safety Initiatives Responding to Customers Sharing information on problem issues and Promoting collaboration between departments to ensure a countermeasures in a timely manner prompt response to customer inquiries •Responding to instances of defective products At Nippon Paper Papylia, officers responsible for sales and Instances of defective products are addressed in accordance marketing take the lead in addressing customer complaints, with product complaint handling rules and regulations. Incidents requests for investigation and inquiries. Through a process of a severe nature than can be attributed to the company’s of collaboration between sales and marketing, technical and products are resolved in a timely manner through collaboration engineering and development and research departments as well between the responsible sales and marketing department, the as mills, every effort is made to reply in a timely manner. Quality Assurance Department and all other related departments. Moreover, officers responsible for sales and marketing as The utmost priority is placed on addressing and satisfying the well as quality assurance call on printing and other companies. requirements of customers. Information relating to problem issues Information obtained through this process of onsite inspection on and countermeasures are forwarded from the company’s head the status of consumption is used to further improve quality and office Technical & Engineering Division as well as the Quality to boost new product development. Assurance Department and shared with the president, mills and relevant in-house departments. Framework for handling customer inquiries, complaints and claims Customer Responsibility •Providing pertinent product information Customers Nippon Paper Papylia strives to consistently respond to customer Flow of information Flow of generated Report information Report inquiries. To this end, all relevant product departments coordinate generated with the appropriate parties and departments within the company. Sales agents, wholesalers Flow of information The company has also established a page on its website to generated Written report Report provide readers with individual products details and to field Paper Sales Division / customer inquiries. Special Products Marketing Division Co., Ltd. Papylia Paper Nippon of Activities Flow of information generated Written report Customer Service Response Center by Inquiry Technology & Development Division / Nature of Inquiry Customer Service Response Center Technology & Quality Assurance Department Cigarette-related paper Tobacco & Industrial Paper Sales Request for Report on the results inquiries Department investigation of investigation Fuji Research and Development Center Thin printing paper inquiries Paper Sales Department Mills Kochi Research and Development Center Functional paper inquiries Special Products Marketing Department Investigation support Specialty paper inquiries Specialty Paper Sales Department

General quality inquiries Technology & Quality Assurance Department New Product Development that Reflects Customers’ Needs The Stable Supply of Products Responding to changing needs by upgrading and expanding Promoting the decentralization of production bases while technical services ensuring stable raw materials procurement Nippon Paper Papylia acquired CoC certification under the FSC® From a risk management perspective, Nippon Paper Papylia and PEFC programs in May 2007. CoC certification is a worldwide strives to secure stable access to wood pulp, non-wood pulp system that certifies the efficacy of wood product processing and other primary raw materials from multiple suppliers to ensure and distribution. the stable supply of its products. In addition, the company is Adhering to the requirements for certification, the company’s promoting a two-tiered structure, encompassing its Harada Mill in Harada and Kochi mills engage in the procurement of resources Shizuoka Prefecture and its Kochi Mill, in Kochi Prefecture, with from forests. These resources are then used in the development respect to the partial production of function and specialty as well of products, which are sold to the market. Harnessing its inherent as cigarette-related paper. strengths, Nippon Paper Papylia promotes wood resource conservation by steadily reducing the weight of products. In this context, the company is actively addressing the need for environmentally friendly products.

Nippon Paper Group Sustainability Report 2012 77 Customer Responsibility Activities of SHIKOKU COCA-COLA BOTTLING CO., LTD. Recognizing the paramount need to satisfy consumers, SHIKOKU COCA-COLA BOTTLING strives to deliver safe and reliable products.

Our Approach to Business and Products Our aim is to continue to pursue growth along with communities we serve by providing moments of “Coca-Cola Operating Requirements” are commonly referred to by the acronym “KORE.” refreshment that anyone can enjoy anytime and anywhere. * “KO” is an abbreviation for the Coca-Cola Company, whose shares are publicly SHIKOKU COCA-COLA BOTTLING manufactures a variety of listed on the New York Stock Exchange. Coca Cola beverages. Products are marketed in four prefectures of Shikoku, Japan, under the slogan “Moments of refreshment that anyone can enjoy anytime and anywhere.” As a member of the communities we serve, SHIKOKU COCA- Architecture of the KORE Management System COLA BOTTLING encourages active, healthy living of people in Shikoku through our beverage business. In addition to its social References How contribution activities that focus on environmental protection Procedures as well as the promotion of sporting and cultural pursuits, SHIKOKU COCA-COLA BOTTLING works diligently to fulfill the Requirements KORE Requirements

expectations of a wide variety of stakeholders. In this context, the Four Standards Speci cations Quality ISO 9001 company actively promotes information disclosure and strives Product Safety ISO 22000, FSSC 22000 What Environment ISO 14001 to create a workplace that is both comfortable and rewarding Standards Occupational Health and Safety OHSA 18001 for its employees. Endeavoring to become a trusted and integral Four Policies Policies Quality, Product Safety, Environment member of society, SHIKOKU COCA-COLA BOTTLING engages Occupational Health and Safety Policy in activities that help us continue to pursue growth along with the community and fulfill its corporate social responsibility as part of The first company in Shikoku to acquire FSSC 22000 the Nippon Paper Group. certification in December 2010

The Komatsu NO.2 Plant, owned and operated by Coca-Cola Operating Requirements (KORE) Management System SHIKOKU COCA-COLA PRODUCTS CO., LTD., was the first production facility of any company in Shikoku to Practicing management based on criteria that surpass acquire FSSC 22000 certification, the recognized standard international standards for product safety. The Coca-Cola group manages its operations based on a The FSSC 22000 product safety benchmark globally integrated proprietary management system called incorporates PAS 220, the underlying precondition of ISO KORE that outlines specific Coca-Cola Operating Requirements. 22000, and is also one component of the GFSI certification The system’s strict standards encompass all of the standards scheme*. The company has taken steps to acquire ISO for quality, product safety, the environment, and occupational 22000 certification since 2008. Recognizing that this health and safety for every operational process starting with the particular standard was not acknowledged under the GFSI procurement of ingredients, through production, distribution, certification scheme, the company accordingly shifted its transportation, and sales, ending when products reach efforts toward acquiring FSSC 22000 certification. As a consumers. The KORE system satisfies the requirements of ISO result, SHIKOKU COCA-COLA PRODUCTS CO., LTD. international standards as well as applicable laws and regulations, was the first company in Japan to acquire FSSC 22000 while incorporating more stringent voluntary standards. certification in 2010. Moving forward, all 28 bottling plants Certification bodies conduct measurements of performance managed under the Coca-Cola system had completed against the requirements of each standard at least once a year. steps to acquire FSSC 22000 certification by March 2011. The objective evaluation from a third-party organization ensures * The GFSI Certification Scheme The Global Food Safety Initiative (GFSI) is a worldwide food safety that the Coca-Cola system’s quality management operates in a framework established to promote and continuously improve uniform fair and equitable way. international standards with respect to the conduct of food plant and farm inspections and surveys while at the same time strengthening the confidence of consumers. The food service, restaurant, retail, and related manufacturing sectors are increasingly working to acquire international certification under schemes acknowledged by the GFSI benchmark. The Consumer Goods Forum, a leading organizational structure within the GFSI, and comprised of approximately 650 international companies of which around 80 are domiciled in Japan, interact to uncover ways in which to increase efficiency across the entire supply chain as well as consumer needs.

78 Nippon Paper Group Sustainability Report 2012 Initiatives Aimed at Enhancing Customer Satisfaction Framework for handling consumer inquiries, complaints and suggestions Establishing a system to effectively respond to consumer complaints through compliance with ISO 10002:2004 The SHIKOKU COCA-COLA Group listens attentively to the comments of its consumers taking great care to respond to all concerns and queries with integrity, speed and accuracy. The Group places the utmost importance on communication. In addition to providing safe and reliable products, services and information, the Group takes great pains to reflect consumer comments in its ongoing activities. In March 2007, the Group issued the declarative statement that it conformed to ISO 10002:2004*, the international management standard for handling complaints. Compliance is a part of the Group’s efforts to further enhance the level of consumer satisfaction. Customer Responsibility In addition, SHIKOKU COCA-COLA BOTTLING received independent, third-party evaluation of the complaint handling procedures of the company from Tokio Marine & Nichido Risk Environmentally Friendly Products and Packages Consulting Company. Results of this evaluation confirmed that the company’s complaint-handling procedures and all related •ecoru Bottle Shiboru, Japan’s lightest bottle for documents were in compliance with ISO 10002:2004. water products, released * ISO 10002:2004 I LOHAS, a new water brand that employs a PET bottle called CO., LTD. BOTTLING COCA-COLA SHIKOKU of Activities ISO 10002 is the international standard for implementing a complaints management system issued by the International Organization for the ecoru Bottle Shiboru – the lightest of its kind in Japan – was Standardization in 2004. ISO 10002 is not a third-party certification system launched on May 18, 2009. undertaken by an evaluation certification organization. While it does provide a guideline standard for handling complaints, ISO 10002 more importantly allows companies to identify to both internal and external parties that it is continuously Features of the lightest bottle dealing with customer complaints in accordance with international standards. In declaring compliance of its own accord, each company is more accountable for Japan’s lightest bottle at 12g, its actions and statements. employing semi-transparent cap •The rst-of-its-kind semi-transparent cap for a Coca-Cola system product ISO 10002: 2004 Management System PDCA Cycle •The lightest cap in Japan for bottles in this size Management Weight around the neck section is Act Plan 20% lighter than previous bottles

Basic policies, system development Easy-to-remove wrap-around label Improve feedback-handling Handle consumer feedback •Wrap-around label as opposed to the processes conventional shrink label •Easy removal without the need to remove using perforation •Substantial reduction in the amount of Analyze of the underlying plastic used due to smaller size and Audits and satisfaction surveys causes of concerns and queries lighter weight

Upsized 555ml bottle with added value Determine what action •Reecting consumer calls for a little Check should be taken Do more than the standard 500ml size

Nippon Paper Group Sustainability Report 2012 79 Customer Responsibility Development of Environmentally Friendly Products Actively developing products that help reduce environmental impact

Basic Stance Case SGEC certified MDF using 100% domestic timber Study (Nippon Paper Lumber Co., Ltd.) Engaging in development that incorporates environmental concerns throughout the entire product lifecycle In March 2011, N&E Co., Ltd., a Nippon Paper Lumber The Nippon Paper Group is engaged in a wide variety of business Co., Ltd. subsidiary, was the first company in the industry activities that utilize wood as a raw material. Wood is a resource to manufacture and market SGEC (see page 57) certified that can be renewed through a process of photosynthesis. Wood- Medium-Density Fiberboard (MDF), made from 100% based products are environmentally friendly and therefore contribute domestic timber. to the creation of a sustainable society. In addition, the Nippon The use of timber produced in Tokushima Prefecture Paper Group takes into consideration environmental concerns is helping to revitalize local forests. Furthermore, the across every stage of the product lifecycle from the procurement application of raw materials accredited under the of raw materials through production to use and disposal. The SGEC system, a certification system initiated in Japan, Group’s efforts at each stage of the product lifecycle from 1 to 5 encourages environmentally friendly procurement. are depicted in the following diagram. Moving forward, the Nippon Paper Group is committed to developing environmentally friendly products and contributing to an affluent society. FERI-W016

Points of environmental concern from a product lifecycle perspective SGEC certified MDF An example of the product used 1 Raw materials Procuring raw materials procurement from sustainable forests in construction PP. 53—66 Recovering and reapplying products that can be recycled and reused Environmentally Friendly Production 2 Production 4 Post-use Reducing emissions of substances that impose a burden on P P. 3 1— 5 2 the environment and minimizing the use of raw materials P. 5 2 Reducing the emission The Nippon Paper Group strives to reduce the emission of of substances that cause global warming substances that cause global warming and impose a burden on and impose a burden on the environment the environment as a key endeavor at the production stage (see 5 Preventing the pages 40 to 43 and pages 48 to 51). Disposal emission of environmental 3 Use Marketing products that help At the same time, the Group works diligently to develop pollutants; reducing conserve resources and energy P. 4 8 the amount of waste technologies that minimize the use of raw materials while achieving the same quality. Environmentally Friendly Raw Materials Procurement Case Developing lower base weight container board Procuring raw materials from sustainable forests Study (Nippon Daishowa Paperboard Co., Ltd.*) The Nippon Paper Group procures raw materials from sustainable forests that are managed taking into consideration environmental Nippon Daishowa Paper has developed a method for and social concerns (see pages 56-59). In addition, the Group reducing the base weight of the C-class linerboard as used is endeavoring to revitalize Japan’s forests by actively utilizing in cardboard boxes for canned coffee. This has reduced domestic timber wherever possible. the amount of raw materials used by approximately 25%. Looking ahead, the company will endeavor to develop methods that minimize the base weight of K-class linerboard and corrugating medium with respect to the base paper used in container board as a part of its expanded lineup of environmentally friendly products. Note: Nippon Daishowa Paperboard Co., Ltd., Nippon Paper Industries Co., Ltd., NIPPON PAPER-PAK CO., LTD., and Nippon Paper Chemicals Co., Ltd. merged on October 1, 2012 with Nippon Paper Industries Co., Ltd. as the surviving company.

80 Nippon Paper Group Sustainability Report 2012 Case Continued improvements in environmentally Environmentally Friendly Utilization Study friendly PET bottles (SHIKOKU COCA-COLA BOTTLING CO., LTD.) Developing products that help conserve resources Conserving energy and resources are important considerations PlantBottle, a next-generation PET bottle that uses during the use of products. The Nippon Paper Group strives between 5 and 30% renewable plant-based materials, to develop products that reduce waste while at the same time was introduced to Japan in 2010 and used for the entire endeavoring to satisfy the needs of users. product range (280ml, 555ml, and 1,020ml) of I LOHAS water brand beverages. Case Scottie Fine Smart & Dry Kitchen Towel Double PlantBottle packaging is made through Study Length Roll a purifying process and the effective use of (Nippon Paper Crecia Co., Ltd.) such materials as sugar cane and molasses, a sugar byproduct. This use of plant-based Nippon Paper Crecia, a company that engages in the sale materials helps reduce the reliance on of familiar household paper products, released Scottie Fine petroleum, an exhaustible resource. Moreover, Smart & Dry Kitchen Towel Double Length Roll. In addition

PlantBottle is identical to conventional to doubling the length of conventional single roll products, Customer Responsibility PET bottles in terms of shape, weight, and this product also reduces sheet size by 10%, which by strength. In addition to ensuring product eliminating the historic waste experienced at the time of use safety, PlantBottle can also be fully recycled allows a 10% increase in the at existing PET bottle recycling plants. number of sheets. Among a I LOHAS host of benefits, this addition PlantBottle manufacturing method to the Scottie fine series

Plant-based material manufacturing method helps secure customer Development of Environmentally Friendly Products storage space and reduce Sugar cane molasses (blackstrap molasses) the frequency of replacement and waste, while curtailing Scottie Fine Smart & Fermentation and distillation the use of materials and Dry Kitchen Towel Double transportation energy. Length Roll

Ethanol

Ethylene Environmentally Friendly Handling after Use Promoting the use of recycled paper Monoethylene glycol (MEG) The Nippon Paper Group markets a wide variety of products made from recycled paper.

PET manufacturing method Case White paper string Monoethylene glycol Puri ed terephthalic Study (Kitakami Paper Co., Ltd.) (MEG) 30% acid (PTA) 70% Utilizing white paper string, made from recycled paper, as an alternative to polyester string, which cannot be recycled, helps reduce the amount of waste. This initiative is driven Imported into Japan in ake form (PET plastic: resin) by the growing number of local government agencies that prohibit the Small test tube-type PET bottle prototype (preform) use of polyester string to tie together used paper including newspapers in Recast by blowing air into the preform causing a balloon effect an effort to curtail waste disposal expenses. White paper string

Nippon Paper Group Sustainability Report 2012 81 Case Election Campaign Poster Notice Boards Case KC FLOCK powdered cellulose Study (Nippon Daishowa Paperboard*) Study (Nippon Paper Chemicals*)

Nippon Daishowa Paperboard, has developed and currently Nippon Paper Chemicals markets KC FLOCK, the brand markets, SIKRA PAK, a highly water-resistant paperboard name for the company’s powdered cellulose made from made primarily from recycled paper. In addition to sheet wood pulp using a refining process. Cellulose is a food fiber palettes and the packaging of marine products, SIKRA that is not harmful to humans. Biodegradable and easily PAK is used as an alternative to the mainstream wooden incinerated, cellulose is used extensively in food, cosmetics, election campaign notice boards. filter aids and other fields. As a filter aid, KC FLOCK is much easier to incinerate compared with the more conventional diatomaceous earth. This helps to significantly reduce waste. In addition, when processing liquids that contain rare metals, the KC FLOCK is able to catch the rare metals which can then be easily recovered after incineration of the KC FLOCK KC FLOCK. An election campaign notice board made from SIKRA PAK

Case Water-soluble paper that reduces the burden Study Case Super Jet Fiber, a heat insulation material imposed on the environment Study (Nippon Paper Lumber Co., Ltd.) (Nippon Paper Papylia Co., Ltd.)

Nippon Paper Lumber manufactures a heat insulation The raw material plant fibers that combine to form paper material for home use that is primarily made of recycled separate when stirred in water. Nippon Paper Papylia newspapers. In general terms, the manufacture of this successfully developed a method that lowers the strength product requires only one-seventh of the energy necessary of this plant fiber cohesion when immersed in water to for the production of more commonly used glass fiber produce water-soluble paper. While the microorganisms insulation materials. The and other properties inherent in general-purpose paper average house uses ensure low environmental impact at the time of disposal, approximately 1.5 tonnes water-soluble paper dissolves instantaneously in water of heat insulation materials. accelerating decomposition and further reducing the On a morning paper burden imposed on the environment. At the same time, subscription basis, this water-soluble paper offers the same properties as general- equates to about 20 years purpose paper and is used for confidential as well as Super Jet Fiber (insulator) of recycled newspapers. medical documents and other wide-ranging applications. Recognizing the environmental properties of water- soluble paper and its ability to instantaneously dissolve when immersed in water, Japan’s Ministry of Land, Environmentally Friendly Disposal Infrastructure, Transport and Tourism utilized the company’s Providing products that impose minimal burden on the product in the paper lanterns launched by each region environment at the time of disposal along the Tohoku Pacific coast during the Yayoi Reducing the amount of waste, enhancing recyclability and Light Festival, which promoting easy waste disposal are all important considerations was held in March 2012 at the disposal stage of each product. While the wood material- to pray the earliest based products supplied by the Nippon Paper Group are reconstruction efforts believed to impose a relatively small burden on the environment following the Great East at the disposal stage, every effort is being made for further Japan Earthquake. Paper lanterns: water-soluble paper environmentally friendly disposal. comprises the paper balloon portion

Note: Nippon Daishowa Paperboard Co., Ltd. and Nippon Paper Chemicals Co., Ltd. merged with Nippon Paper Industries Co., Ltd. and NIPPON PAPER- PAK CO., LTD. on October 1, 2012 with Nippon Paper Industries Co., Ltd. as the surviving company.

82 Nippon Paper Group Sustainability Report 2012 Human Rights, Employment and Labor Responsibility

Management Approach Efforts with regard to Issues

Policy and Management 84 Creating Workplaces that

Basic Stance 84 Support Employee Diversity 86

Philosophy and Basic Policy 84 Basic Stance 86 Employee Education and Training with respect to Employment and Recruitment based on

Human Rights 84 a Respect for Human Rights 86

Concern for Human Rights across the Supply Chain 84 New Graduate Recruitment 86 Hiring and Advancement of Women 86 The Status of Employment and Industrial Relations 85 Promoting Work-Life Balance 86 The Status of Employment 85 Increased Hiring of People with Disabilities 87 Industrial Relations 85 Promoting the Employment of Elderly Persons 87 Cultivating Human Resources 88 Basic Stance 88 Initiatives Aimed at Developing Human Resources 88 Fair Evaluation and Compensation 89 Occupational Safety and Health 90 Philosophy and Basic Policy on Safety and Disaster Prevention 90 System to Promote Occupational Safety and Health 90 Status of Occupational Accidents 91 Safety Education 92 Efforts regarding Safety and Disaster Prevention 92 Efforts regarding Hygiene and Health 92

Nippon Paper Group Sustainability Report 2012 83 Human Rights, Employment and Labor Responsibility Policy and Management Building a healthy and safe workplace environment in which employees, who serve as the driving force behind the Group’s corporate activities, can take full advantage of their individual capabilities while conforming to the highest ethical standards

Basic Stance responsibility of building a workplace environment that allows individual employees to reach their full potential and to put in Placing the utmost emphasis on the optimal application of place a system that rewards results. a diverse pool of human resources while adhering strictly Taking all this into consideration, the Nippon Paper Group to a policy of safety and disaster prevention established its Philosophy and Basic Policy on Human Rights, The Nippon Paper Group respects human rights in every Employment and Labor. aspect of its business activities and aims to develop a working In addition, the Group joined the United Nations Global Compact environment that makes the most of a diverse range of human in November 2004 and supports its 10 principles. resources. Recognizing the important standing and role played by human resources, a company should work in partnership Employee Education and Training with respect to with its employees to secure mutual growth. In utilizing a diverse Human Rights workforce, the Nippon Paper Group therefore places considerable weight on building a fair evaluation and compensation system Providing employees with educational opportunities for the as well as education and training programs that help employees purpose of implementing appropriate personnel policies reach their full potential. The Nippon Paper Group provides employees with education Paper manufacturing is both a core Group activity as well opportunities for the purpose of implementing appropriate as a typical process industry. While the Nippon Paper Group’s personnel policy with respect to human rights. The officers production sites use heavy machinery and engage in operations responsible for personnel matters, from each operating company that give rise to inherent dangers, every effort is made to maintain and works, attend training courses and seminars hosted by a safe working environment and to take all appropriate measures government authorities and agencies. to ensure safety and to prevent disasters. Concern for Human Rights across the Supply Chain Philosophy and Basic Policy Promoting initiatives across the entire supply chain Respecting fundamental human rights and supporting the Concern for human rights and labor across the entire supply UN Global Compact chain is a clearly defined component of the Nippon Paper In order for the Nippon Paper Group to gain the trust of society Group’s Philosophy and Basic Policy Concerning Raw Materials and to adequately fulfill its responsibilities, each and every Group Procurement. At the same time, the Group conducts supplier employee must act with a high sense of moral standards and surveys and hearings to confirm that these concerns are indeed strong motivation. On this basis, it is important for the Group being practiced (see page 56). to promote employee awareness while ensuring that employee In addition, Nippon Paper Group forest management takes behavior remains consistent with generally accepted morals. into consideration the culture and traditions of residents in each At the same time, the Nippon Paper Group is charged with the region of its overseas afforestation business (see pages 62-65).

Philosophy and Basic Policy on Human Rights, Employment and Labor (established on October 1, 2004)

Philosophy Respecting fundamental human rights at all times and making 2. Prohibition of forced and child labor the most of the individuality and capabilities of a diverse range We pledge not to force any employees to carry out of human resources, we aim to create a company overflowing unreasonable work. We also pledge not to employ children with dreams and hope. aged under the minimum employment age stipulated in local laws and regulations. Basic Policy 1. Respect for human rights 3. Promotion of personnel training and skill development We pledge to respect fundamental human rights and not to We pledge to promote personnel training and skill engage in any behavior that disregards such rights, including development programs to help improve individual employees' discrimination based on matters such as nationality, race, abilities and skills through the establishment and maintenance place of birth, sex, religion, medical conditions or disabilities, of structures to make the most of the individuality and sexual harassment and the abuse of power. We also pledge capabilities of a diverse range of human resources. to manage personal information appropriately in order to prevent infringements on privacy.

84 Nippon Paper Group Sustainability Report 2012 Human Rights, Employment and Labor Responsibility The Status of Employment and Industrial Relations Building a better company based on sound industrial relations

The Status of Employment principal subsidiaries, has taken steps to establish a variety of committees that examine specific issues relating to both Employing a workforce of over 13,000 employees in and management and labor. These committees cover such fields as outside of Japan the operations of labor and management agreements as well The Nippon Paper Group maintains a workforce of over 13,000 as personnel measures. Management and labor also engage in employees in and outside of Japan. In its efforts to fulfill its ongoing discussions that reflect genuine and deep-seated mutual responsibility toward society, the Group strives to ensure stable respect. Deliberations and agreements between management employment while continuously recruiting new employees. and labor provide the basis for a variety of initiatives, as well as In addition to building a pleasant and comfortable workplace efforts to improve the workplace environment. Complementing environment, the Group works diligently to maintain a high these endeavors, regular central labor-management council percentage of employees taking child-care leave as well as a high meetings provide a forum to discuss diverse issues from corporate retention rate for newly hired employees. management to terms and conditions including employee benefits.

Industrial Relations •Notification regarding major work-related changes Major changes to such work-related issues as personnel Improving the workplace environment through labor and systems and steps to rationalize human resources are in principle management consensus implemented on The Nippon Paper Group strives to maintain a sound relationship the basis of prior with its employees. At the same time, the vast majority of discussions between consolidated subsidiaries have formed labor unions. Irrespective labor and management. of the existence of a labor union, every effort is made to promote As a result, companies smooth industrial relations. within the Group do

For example, under the common objective of building a not unilaterally impose Human Rights, Employment and Labor Responsibility better company, Nippon Paper Industries, one of the Group’s A central labor-management council meeting changes on employees.

The status of employment

1. Number of employees on a consolidated basis 5. Rate of employment of disabled persons (as of March 31, 2012) Nippon Paper Industries Co., Ltd.: 1.82% Number of employees on a consolidated basis: 13,407 (as of June 1, 2012)

(male 12,072; female 1,335) Nippon Paper Group, Inc., and five direct subsidiaries*: 1.76% Relations Industrial and Employment of Status / The Management and Policy (Number of employees at overseas bases: 1,625) (as of April 1, 2012) 2. Percentage of female employees in management 6. Average years of employment (as of March 31, 2012) (as of March 31, 2012) (Nippon Paper Group, Inc., and five direct subsidiaries*) Nippon Paper Group, Inc., and Nippon Paper Average Years of Industries Co., Ltd.: 2.04% Average Age Employment Consolidated subsidiaries in Japan: 1.30% Male 42.3 21.3 3. Number of newly recruited employees at Female 41.4 19.8 consolidated subsidiaries in Japan (FY2011) Total 42.3 21.2

New Graduates Mid-Career Recruits 7. New graduate recruits three-year retention rate Male 73 86 Nippon Paper Industries Co., Ltd.: 92.5% Female 10 14 Total 83 100 * Five direct subsidiaries Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Co., 4. Number of employees taking child-care leave (FY2011) Ltd., Nippon Paper Crecia Co., Ltd., Nippon Paper Papylia Co., Ltd. and SHIKOKU COCA-COLA BOTTLING CO., LTD. Of the aforementioned five Nippon Paper Group, direct subsidiaries, Nippon Daishowa Paperboard Co., Ltd. merged with Inc., and Nippon Paper Consolidated Industries Co., Ltd subsidiaries in Japan Nippon Paper Industries Co., Ltd., NIPPON PAPER-PAK CO., LTD., and Nippon Paper Chemicals Co., Ltd. on October 1, 2012 with Nippon Paper Number of employees Industries Co., Ltd. as the surviving company. taking child- 12 27 care leave Male employees 1 2 Female 11 25 employees (take-up rate 100%) (take-up rate 89%)

Nippon Paper Group Sustainability Report 2012 85 Human Rights, Employment and Labor Responsibility Creating Workplaces that Support Employee Diversity With a deep respect for fundamental human rights and the unique characteristics of each individual, the Nippon Paper Group consistently recruits new graduates and actively employs women and people with disabilities.

Basic Stance The Nippon Paper Group is making efforts to aggressively hire women and to develop workplaces where women can more Developing a dynamic organization where diverse easily excel. employees can demonstrate their capabilities Employees with different personalities stimulating one another Percentage of female employees in management1 and mutually helping to develop a deep understanding serve (Nippon Paper Group, Inc. + Nippon Paper Industries Co., Ltd., the Nippon Paper Group (Japan2)) to boost energy in the workplace. Amid forecasts of a drop in (%) Nippon Paper Group, Inc. + Nippon Paper Industries Co., Ltd. the pool of labor due to such factors as the declining birthrate, Nippon Paper Group (Japan) 1.87 efforts by companies to expand the breadth of their organizations 2.0 1.79 1.72 1.76 1.67 1.65 2.04 by utilizing diverse workers are becoming increasingly vital to ensuring sustainable development and growth. Based on this 1.0 1.24 1.30 understanding, the Nippon Paper Group strives to secure a diverse employee pool. 0 2006 2007 2008 2009 2010 2011 2012 (FY) 1 Data for fiscal 2011 is as of the end of the fiscal year. Figures for the fiscal years Employment and Recruitment based on a Respect 2007 to 2010 are data as of April 1 of each following fiscal year. for Human Rights 2 Data for the Nippon Paper Group (Japan) is the total for consolidated subsidiaries in Japan Promoting discrimination-free recruitment and employment while endeavoring to establish open and fair •Promoting the hiring of women evaluation systems In relative terms, Nippon Paper Industries does not engage in Based on its Philosophy and Basic Policy on Human Rights, large volume general position hiring. While the ratio of male and Employment and Labor, the Nippon Paper Group promotes female hires differs from year to year, every effort is made to meet discrimination-free recruitment and employment. As a part of its the established target of ensuring that the proportion of newly recruiting activities, the Group employs a selection process that hired female employees is kept above a certain level. places particular emphasis on test and interview results. Factors including nationality, place of birth, gender and educational Number of new graduates hired background have no place in selection. In order to ensure that (Nippon Paper Industries Co., Ltd., main career-track position) evaluation systems are both fair and acceptable, the Group Male Female Ratio of female new graduates hired (%) to total new graduates hired provides feedback of performance review results to employees. 21 60 18 18 20 19 8 7 45 9 15 New Graduate Recruitment 12 13 15 8 Ensuring that Group companies engage in new graduate 30 6 10 47 46 42 recruitment on an ongoing basis 15 30 27 3 2 5 The Nippon Paper Group hires new graduates on a continuous 13 15 0 0 basis to ensure a balanced age composition of its workforce and 2006 2007 2008 2009 2010 2011 2012 (FY) to provide the younger generation with employment opportunities. Group companies in Japan hired a total of 83 new graduates (73 •Comeback entry system males and 10 females) in fiscal 2011. Certain Group companies Certain employees, particularly women, tend to also engage in mid-career hiring. At total of 100 employees were leave employment for personal reasons including child care, hired during fiscal 2011. nursing care and the transfer of a spouse. Nippon Paper While recruiting activities are undertaken on an individual Industries launched a reemployment system for these operating company basis, employees can rotate between employees in October 2007. Nine individuals have applied for companies upon request depending on their suitability and reentry to the workforce since this system was established. Two personnel training needs. have been reemployed.

Hiring and Advancement of Women Promoting Work-Life Balance Actively pursuing the recruitment of women Realizing an ideal workplace environment that places While women account for 9.9% of the total number of Nippon equal emphasis on work and family concerns Paper Group employees in Japan, they represent only around The Nippon Paper Group strives to establish an ideal workplace 1.3% of total management. environment that allows employees to reach their full potential while

86 Nippon Paper Group Sustainability Report 2012 balancing work and family needs. In May 2011, Nippon Paper Increased Hiring of People with Disabilities Group, Inc. and the Group’s major operating companies took steps to reduce electric power consumption in response to shortfalls in Improving the rate of employment of people with the supply of electric power as a result of the Great East Japan disabilities across the entire Group Earthquake. At the same time, the Company and major Group For safety reasons, a number of restrictions exist on the companies introduced daylight saving time at their respective head employment of disabled workers at paper manufacturing office facilities in order to promote work-life balance. production sites. The Japanese government set a rate for the employment of people with disabilities of 1.8% of a company’s Working hours and annual leave taken workforce, to be achieved by the end of March 2013. Nippon (Nippon Paper Industries Co., Ltd.) Paper Industries aimed to achieve this rate by 2009. As a result, Fiscal years 2007 2008 2009 2010 2011 the company achieved its target in June 2009 when the rate Total number of reached 1.84%. As of June 2012, the rate stood at 1.82%. With working hours 1,946 1,841 1,776 1,792 1,744 the statutory rate set to rise to 2.0% from April 2013, the Nippon The rate of annual leave taken by Paper Group as a whole will continue efforts to lift its rate for the employees 71.4 73.5 67.7 73.0 68.0 (Union employee employment of people with disabilities. average) The rate of employment of people with disabilities1 Complying with Japan’s Act on Advancement of (%) Nippon Paper Industries Co., Ltd. • Nippon Paper Group, Inc., and ve direct subsidiaries2 Measures to Support Raising Next Generation Children 2.0 1.79 1.84 1.82 1.82 The Nippon Paper Group has put in place an action plan and 1.51 1.76 strives to support its employees in maintaining work and child-care 1.69 balance in accordance with the Act on Advancement of Measures 1.0

to Support Raising Next Generation Children. As one example, Human Rights, Employment and Labor Responsibility Nippon Paper Industries, revised its systems in line with revisions 0 to Japan’s Child Care and Family Care Leave Act. The company 2007 2008 2009 2010 2011 (FY) has continued to implement systems that exceed the provisions 1 Nippon Paper Industries Co., Ltd., data is as of June 1 of each fiscal year; stipulated under revised legislation. This includes extensions to Other Group company data is as of April 1 of each fiscal year 2 Nippon Paper Group, Inc., and five direct subsidiaries the exemption period for overtime working hours, the application Total data for six companies comprising Nippon Paper Group, Inc. (the period for child care and reserve leave for child rearing. Company), Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Co., Ltd., Nippon Paper Crecia Co., Ltd., Nippon Paper Papylia Co., Ltd., and SHIKOKU COCA-COLA BOTTLING CO., LTD. Action Plan in Response to the Act on Advancement of Creating Workplaces that Employee Support Diversity Measures to Support Raising Next Generation Children (Nippon Paper Industries) Promoting the Employment of Elderly Persons Upgrading and expanding systems with the aim of 1. Take-up of child care leave promoting employment of elderly persons One or more male employees to take up child care leave The Nippon Paper Group established the Reemployment after during the period of the plan Retirement System to respond to the needs of an aging society A female take-up rate of 70% or more Establishment of a project team to promote the take-up and to facilitate the passing on of skills. of child care leave by male employees In fiscal 2002, Nippon Paper Industries introduced a 2. Reduction of overtime working hours and the reemployment system to allow union employees to work up to the promotion of use of paid annual leave age of 65. 3. Implement workplace tours for the families of employees

Period to achieve objectives outlined in the plan: March Reemployment performance* 31, 2013 Fiscal years 2007 2008 2009 2010 2011 Number of employees 35 50 55 62 44 seeking reemployment Number of employees 34 44 52 59 43 reemployed

* Results for members of the Nippon Paper Industries Union

Nippon Paper Group Sustainability Report 2012 87 Human Rights, Employment and Labor Responsibility Cultivating Human Resources Supporting efforts to enhance the capabilities of each employee, while implementing proper evaluation systems based on skills and performance

Basic Stance •Support for self-development and voluntary career planning Cultivating human resources The Nippon Paper Group supports employee self-development The Nippon Paper Group places considerable emphasis on and voluntary career planning. In addition to existing training building positive ties with employees and developing human programs based on various stages throughout each employee’s resources. At the same time, the Nippon Paper Group continues career, Nippon Paper Industries, for example, provides extensive to build a mechanism whereby motivated and capable individuals learning opportunities for employees. These opportunities allow can improve their skills by equitably offering opportunities to learn. employees to select from a wide-ranging curriculum to help Furthermore, every effort is made to assign the right persons to the improve those capabilities that employees themselves consider right positions, and to provide fair evaluation and compensation. require development. Nippon Paper Industries expanded its program to 156 correspondence courses in fiscal 2012. Initiatives Aimed at Developing Human Resources Moreover, steps were taken to introduce various age-based career training programs for employees in their 30s, 40s, and Recognizing that employees are important partners, the 50s in fiscal 2007. These programs help identify strengths and Nippon Paper Group strives to build sound relationships objectively locate weaknesses and cultivate human resources. and additional processes In reinforcing its mechanism for human resource development, including comprehensive the Nippon Paper Group focuses its attention on the following evaluation. Together with the five areas: (1) support for self-development and voluntary in-house FA system adopted career planning; (2) early identification and development of from fiscal 2008, every effort potential leaders; (3) reinforcement of frontline capabilities; (4) Career training is being made to revitalize support for the development of lifelong as well as career plans; (Nippon Paper Industries) human resources. and (5) assignment of the right people to the right positions. Complementing these endeavors, the Group has also established a Global Human Resources Bank.

Career development support by Nippon Paper Industries for general positions

Newly hired 30 40 45 50 54 55 60 Assistant Manager ( Manager Level ) ( General Manager Level )

Assessment Education Assessment of Education Education Assessment Education and training by Education of potential for and potential for 1A-grade and and training of potential assignment to training for assignment to

career standing training for employees for promotion education second-grade newly rst-grade and training for new in their to exepert manager appointed manager recruits second year level positions managers positions

Training program for select junior managers

Selective education and training OJT

Career education and Career education and training for training for employees Career education and Career development

support programs employees in their 30s in their 40s training for employees + + in their 50s FA program FA program

In-house offer Career challenge program

Early preferential retirement program

88 Nippon Paper Group Sustainability Report 2012 •Early identification and development of potential leaders •Assignment of the right people to the right positions As one example of the cultivation of a human resources plan, The core operating companies of the Nippon Paper Group Nippon Paper Industries implements training programs for periodically survey employees to ascertain what kind of job selected junior managers. assignments they wish to have. Based on the results of these Recognizing the need to foster personnel who possess a surveys, every effort is made to match employee strengths with global perspective in future overseas business development job types. endeavors, Nippon Paper Industries and other Group companies In addition, Nippon Paper Industries launched the In-house have put in place an open-application overseas study program. Staff Recruitment Program in fiscal 2005. The 45 programs This program is supported by the dispatch of personnel to initiated to date have attracted 72 applications. After completing overseas tertiary institutions as well as overseas assignments to the necessary screening process, 29 employees were the various offices of Nippon Paper Group, Inc. outside of Japan. subsequently transferred.

•Reinforcement of frontline capabilities •Establishing the Global Human Resources Bank The human resource capabilities, or “field power,” of the Nippon Paper Industries established the Global Human Resources production frontline represent the heart of the manufacturing Bank, a list of personnel with experience either working or process. This field power is therefore vital in the Group’s existence studying overseas, or with advanced language skills in an effort to as a going concern amid increasingly harsh competition both in better address global expansion, which continues to progress at and outside Japan. The Nippon Paper Group passes on to each an accelerated pace. generation the technologies and skills nurtured over a lengthy At the same time, steps will be taken to foster personnel who period. Every emphasis must be placed on maintaining and can more effectively excel on the world stage by introducing strengthening the capabilities of its human resources. special education and training programs. Currently, 460 personnel Nippon Paper Industries organized the “Committee to Study are registered with the bank. the Strengthening of Mill-Level Field Power” in fiscal 2006.

The company also conducted education aimed at introducing Human Rights, Employment

Fair Evaluation and Compensation and Labor Responsibility initiatives across all mills in fiscal 2007. Based on these endeavors, activities aimed at strengthening the frontline have Engaging in fair employee evaluation based on skills been undertaken at all mills since fiscal 2008. Through these and performance means, Nippon Paper Industries has put in place a framework that The Nippon Paper Group conducts individual review sessions covers the technologies and skills to be carried forward at each during which employees are provided with feedback on their production site. In addition to evaluations from managers. This forms part of the Group’s efforts analyzing areas of individual to ensure that personnel evaluations are fair and transparent. weakness as well as specific Nippon Paper Industries conducts competency and Cultivating Human Resources points that require bolstering, performance evaluations of its managers and general position steps are being taken to employees from fiscal 2000. The competence evaluation is based implement education and on competency that dearly indicates the guidelines for action. The Group discussions training on a priority basis. performance evaluation is based on the management by objective system. Since fiscal 2006, all employees have been provided •Support for the development of lifelong as well as with feedback on evaluation results. By informing employees career plans through individual interview sessions, Nippon Paper Industries In recent years, employees have witnessed a rise in the age is endeavoring to promote a higher level of understanding and at which public pension payments begin, as well as signs of acceptance of evaluation results. In addition, the company increasingly diverse lifestyles. Employees must therefore consider commissions assessments from specialist external parties in an a number of factors when planning their careers and life after effort to boost the objectivity of its evaluation process with respect retirement. Against this backdrop, and in an effort to allay the to the appointment screening of management and other positions. concerns and anxieties of employees, core operating companies In ensuring that employees are fully informed of the results of within the Nippon Paper Group offer Life Plan Seminars to their evaluation based on clearly defined criteria, Nippon Paper enhance employee understanding of each company’s and Industries encourages employees to recognize their strengths and the government’s programs, as well as the need to develop areas where they need more work. This helps to further motivate meaningful life plans that include health management. employees toward skills development.

Nippon Paper Group Sustainability Report 2012 89 Human Rights, Employment and Labor Responsibility Occupational Safety and Health Maintaining a workplace environment in which employees can go about their duties without undue anxiety by working daily to uncover inherent risks

Philosophy and Basic Policy on Safety and System to Promote Occupational Safety and Health Disaster Prevention Labor and management working together to build a safe Taking into consideration the characteristics of each business workplace environment to secure occupational safety and to prevent disaster The Nippon Paper Group has established the Safety and Health Maintaining a safe work environment for employees is one of Committee. This committee is coordinating Group-wide employee the most basic responsibilities of any corporation. The Nippon measures aimed at securing occupational safety, preventing Paper Group strives for “safety first” operations. Irrespective of the disasters and preserving security in and outside of Japan. amount of care taken, it is virtually impossible to totally eliminate Labor and management occupational safety and health all risks inherent in the workplace. It is nevertheless important meetings are held regularly once each year. Officers responsible to maintain an unwavering daily commitment to uncovering and for occupational safety and health from the head offices of minimizing these risks. each operating company and mills come together to discuss As a part of efforts to consistently engage in sound a variety of issues, including the annual occupational safety management while responding to the trust of employees, it is also and health management plan. Safety and health committees important to build a pleasant and comfortable workplace that are also established at each mill and works. These committees helps maintain and improve employees’ health. deliberate on and determine important management matters Therefore, the Nippon Paper Group formulated the Philosophy relating to occupational safety and health as well as activity and Basic Policy on Safety and Health Measures in 2004. Under policies. Employees are notified of the details of decisions through this philosophy and basic policy, the Group strives to establish a department meetings and internal mill newsletters. safe and appealing workplace while each mill and works strives to prevent accidents and disasters. The Nippon Paper Group’s structure to promote occupational safety and health The Safety and Health Committee (controlling the whole Group) Philosophy and Basic Policy on Safety and Health (established on October 1, 2004) Measures The Secretariat of the Safety and Health Subcommittee Philosophy In addition to acknowledging that it is the company’s duty Mills of Nippon Paper Industries Co., Ltd. Group companies to guarantee safety and health while striving to develop pleasant, improved working conditions, we pledge to work ceaselessly to prevent any and all accidents, minor or major. Examples of Organizations for Health and Safety in Mills:Kushiro Mill, Nippon Paper Industries Co., Ltd. Safety Manager Mill Manager Basic Policy on Safety and Health Union Health Manager General Safety and 1. To respect the Industrial Safety and Health Law. Industrial physician Health Supervisor Health Controller in 2. To establish self-imposed standards and step up Health Engineering Working Environment daily management. Safety and Health Committee Measurement Expert 3. To set up a management structure and clearly define roles, responsibilities, and authority. Safety and Environmental 4. To strive to improve safety and health training. Manager by position Control Dept. Safety and Health and status Liaison Council 5. To develop and maintain a safe, pleasant Safety Control Section working environment. Safety and Health Secretariat Meeting Basic Policy on Safety and Risk Prevention 1. To respect laws and regulations pertaining to safety and risk prevention. •Mill safety audit system 2. To establish self-imposed standards and step up The Nippon Paper Group engages in occupational safety and daily management. health activities on both an organizational and continuous basis. 3. To set up a management structure that clearly defines As a part of these endeavors, the Group conducts mill safety roles, responsibilities, and authority. audits while raising the level of safety management. 4. To strive to improve safety and risk prevention education In addition, audits implemented together with the auditors of and training. other companies were introduced within each Group company 5. To work in cooperation with related government and from 2010 in an effort to further promote safety activities. local communities and share information. By deepening exchange between companies, the Group is endeavoring to raise the quality of its audits.

90 Nippon Paper Group Sustainability Report 2012 •Occupational safety and health management system The Group has continued to pursue an occupational accident The Nippon Paper Group has adopted an occupational safety and frequency rate of 0.3% or less since 2009. To this end, steps health management system in order to better promote such activities. have been taken to promote the use of risk assessment methods, Nippon Paper Industries introduced the Nippon Paper activities aimed at notifying employees of potential dangers, Occupational Safety and Health Management System (NPSS) patrols, and education and training. in 2010. This system is designed to help reduce occupational accidents, ensure the systematic and continuous implementation Occupational accident frequency rate of safety and health activities and promote the passing on of (Frequency rate) Nippon Paper Group* Pulp, paper and processed paper product Manufacturing industry manufacturing industry safety and health know-how to each succeeding generation of 2.0 1.72 1.67 employees. Similar systems have also been introduced or are 1.49 1.55 1.49 1.5 being considered by other Group companies to better build a 1.12 0.99 0.98 1.05 working environment in which employees can go about their 1.0 1.09 0.96 duties without concern or anxiety. 0.5 0.75 0.55 0.46 0 0.39 The status of occupational safety and health 2007 2008 2009 2010 2011 (Year) management system introduction Company Name Status of Introduction Occupational accident severity rate Nippon Paper Industries Co., Ltd.* Introduced in January 2010 (Severity rate) Nippon Paper Group* Pulp, paper and processed paper product manufacturing industry Nippon Daishowa Paperboard Manufacturing industry Introduced in January 2011 Co., Ltd.* 0.9 0.75 Nippon Paper Crecia Co., Ltd. Introduced in January 2011 0.6 0.60 Nippon Paper Papylia Co., Ltd. Introduced in January 2011 0.33 SHIKOKU COCA·COLA 0.28 Acquired OHSAS certification 0.3 0.20 0.20 PRODUCTS CO., LTD. in 2009 0.39 0.10 0.10 0.12 0.08 0.09 0.08 NIPPON PAPER-PAK CO., LTD.* Introduced in January 2011 0 0.01 0.03 Nippon Paper Chemicals Co., Ltd. Introduced in January 2012 2007 2008 2009 2010 2011 (Year)

* Human Rights, Employment and Labor Responsibility Kitakami Paper Co., Ltd. Plans to introduce in January 2013 * The Nippon Paper Group: The manufacturing works of the following six Group NIPPON PAPER UNITEC companies: Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Introduced in January 2011 CO., LTD. Co., Ltd., Nippon Paper Crecia Co., Ltd., Nippon Paper Papylia Co., Ltd., * Nippon Paper Industries Co., Ltd., Nippon Daishowa Paperboard Co., Ltd., Nippon Paper Chemicals Co., Ltd. and NIPPON PAPER-PAK CO., LTD. NIPPON PAPER-PAK CO., LTD., and Nippon Paper Chemicals Co., Ltd. merged on October 1, 2012 with Nippon Paper Industries Co., Ltd. as the An incident that led to an occupational fatality surviving company. Report (Nippon Paper Industries Co., Ltd.) •Reinforcing risk assessment procedures The Nippon Paper Group adopted risk assessment procedures in An incident that led to an occupational fatality occurred at Occupational Safety and Health the Hokkaido Mill of the Yufutsu Works on July 13, 2012. 2009 as a preliminary step toward building an occupational safety Overview of the incident and health management system. In adopting these procedures, Date of occurrence: July 13, 2012 the Group put in place its own methods and processes. Risk Location: The Hokkaido Mill of the Yufutsu Works owned assessment is undertaken from a number of viewpoints. The and operated by Nippon Paper Industries Co., Ltd. Group has adopted a three-tiered assessment system beginning Victim: A 22 year old employee with three years and three with the section chief, his or her months working experience Type of work: Paper machine air cleaning operations immediate superior and finally, Circumstances: Equipment was caught between the roll department managers. For its and blow-box by an air hose during cleaning activities at part, Nippon Paper Industries the time paper machines commenced operations. has identified areas of particular Contributing factor: There are indications that in bringing focus based on past incidents the air hose too close to the jamming section, the operator was drawn into the paper machine together with the hose. and is pushing forward a risk Meeting to exchange the risk Countermeasures: assessment information assessment review in order to (1) Reinforce operating method education and training (The Yufutsu Works of Nippon eliminate any recurrence. within the workplace and ensure strict adherence to Paper Industries’ Hokkaido Mill) operating safety standards; (2) install cleaning equipment to remove the need for Status of Occupational Accidents manual cleaning activities; and (3) break down operating safety standards for all Preventing occupational accidents operations, thoroughly uncover all operating risks through a process of risk assessment, and establish The Nippon Paper Group places the utmost importance on safety countermeasures. in the workplace. It is, however, by no means satisfied with its performance to date.

Nippon Paper Group Sustainability Report 2012 91 Human Rights, Employment and Labor Responsibility Occupational Safety and Health

Safety Education •Traffic safety initiatives Traffic safety education is offered to raise the awareness of Raising employee awareness toward safety through employees toward traffic safety. The objective is to ensure the systematic education and training safety of employees while commuting to and from work. In The Nippon Paper Group places considerable weight on addition, the Group actively participates in various traffic safety employee safety education and training. Beginning with campaigns organized by local police authorities. Every effort is employees in supervisory positions, these efforts are designed to made to ensure that all employees remain conscious of the need raise employee awareness toward occupational safety and health. to drive safely. Nippon Paper Industries puts in place an annual NPSS plan at each of its works. Each works then implements various occupational safety and health education programs in accordance with these plans, covering every stage of an employee’s career from initial hiring through to supervisor training. In this manner, the company is endeavoring to achieve incident-and accident-free workplaces by again promoting awareness.

Efforts regarding Safety and Disaster Prevention Traffic safety seminar (Nakoso Mill, Nippon Paper Industries Co., Ltd.) Steadfastly promoting a wide range of measures •In-house safety measures Efforts regarding Hygiene and Health Nippon Paper Industries has always endeavored to ensure workplace safety with the intention of preventing personal Taking into consideration the importance of mental and injury to any and all people working within its mill premises. physical health The company has accordingly implemented safety patrols •Maintaining and improving employees’ health and education in collaboration with the labor union as well as The objective of the Nippon Paper Group in terms of the health primary and secondary subcontractors. Safety patrols involve of its employees is the prevention and early detection of disease. designated personnel patrolling work premises to identify areas For example, during regular health examinations, a public health of potential safety concern as well as risky employee behavior. nurse interviews each employee under the supervision of an Since 2006, we have enhanced the safety not only in-house but industrial physician and offers advice on the prevention of disease. also secondary subcontractors by clarifying the responsibility of In addition, industrial physicians regularly visit workplaces. Based primary subcontractors. on the results of these visits and their advice, the Group strives to improve working environments to allow for better hygiene and •Natural disaster and fire countermeasures health management. Moreover, the Nippon Paper Group takes Individual mills and works within the Nippon Paper Group adopt great care in supporting the health of not only employees but also their own disaster prevention measures that reflect the nature their families. An opportunity for a medical examination is offered of their operations and regional characteristics. These mills and to the spouses of employees. works create manuals on disaster prevention including steps to prepare for a natural disaster. They also conduct emergency drills. •Tackling mental health Note: Please refer to pages 6 to 11 for measures adopted following the Great Nippon Paper Industries has historically held lectures and East Japan Earthquake. seminars about mental health in each mill and works. In 2003, the company introduced a mental health care system on the web, which is a mechanism to provide mental health checkups and counseling to all employees. Among a number of initiatives, all company employees have been requested to complete an annual mental health examination, which entails the completion of survey sheets, since 2008. Nippon Paper Industries is putting in place a structure that is designed to maintain the mental health Emergency drill of its employees while taking into consideration individual privacy (Takebashi head office building) concerns and confidentiality.

92 Nippon Paper Group Sustainability Report 2012 Community Responsibility

Management Approach Environmental Activities 98 Preserving Biodiversity 98 Policy and Management 94 Promoting Recycling Activities 98 Basic Stance 94 Structure for Promoting Social Contribution Activities 94 Activities Aimed at Promoting Coexistence with Local Communities and Society 99 List of Social Contribution Activities 94 Regional Cleaning Activities 99 Efforts with regard to Issues Preserving Local Community Cultures 99 Educational Activities 96 Coexistence with Local Communities 99

Providing Opportunities to Tour Group Supporting the Fujihara Foundation of Science 99 Companies and Their Facilities 96 Providing Opportunities for Work Experience 96 Providing Products for Use in the Classroom 96 Utilizing Company-owned Forests in Japan 97 Providing Educational Opportunities through Sport 97

Nippon Paper Group Sustainability Report 2012 93 Community Responsibility Policy and Management The Nippon Paper Group engages in a variety of social contribution activities to garner the trust of and remain close to local residents as a good corporate citizen.

Basic Stance Structure for Promoting Social Contribution Activities Each Group company and works engages in social With the CSR Division playing a central role, the Nippon contribution activities guided by a Group-wide philosophy Paper Group positions officers responsible for social and principles. contribution activities in each Group company, and The Nippon Paper Group is helping to realize a sustainable engages in ongoing activities. society by effectively and appropriately utilizing trees, a renewable In June 2008, the Group established the CSR Division. This resource, to produce a variety of products including paper. In division takes the lead in promoting Group-wide social recent years, the Group has also placed considerable emphasis contribution activities. on CSR management. In this context, the Nippon Paper Group is Each Group company appoints an officer responsible for aggressively engaging in social contribution activities as a good overseeing social contribution activities. Each responsible corporate citizen. officer makes efforts to ensure that existing social contribution The Group conducts a broad spectrum of activities that activities are undertaken on a continuous basis while upgrading make the most of its specialist expertise and business resources and expanding their content and details. In recent years, in locations spread across the length and breadth of Japan. In particular emphasis has been placed on contributing to regional addition to clean-up activities around areas in close proximity development. In addition to mill tours for school-age students, the to its mills, the Group participates in a variety of events deeply Group has proactively targeted community events including, for rooted in each regional community including local festivals while example, clean-up activities. at the same time conducting mill tours for local residents. In order to stimulate increased thought toward the environment and Specific activity themes related issues, the Nippon Paper Group conducts lectures on such topics as paper recycling. These efforts are complemented • Promote activities that effectively utilize the business by the School of Friendship for Forests and Paper, which utilizes resources and specialist expertise of each Group company Company-owned forests. • Increase the community involvement of Group company Looking ahead, the Group will continue to upgrade and mills and overseas affiliates expand its activities. Redoubling its efforts, the Group will continue • Promote corporate citizenship activities in which our to support the development of society through Group-wide social employees play an active role contribution activities. • Effectively use the forests owned by Nippon Paper Industries, in Japan (about 90,000 hectares) Philosophy and Principles for Social Contribution • Employ effective PR inside and outside the Group Activities (formulated on April 1, 2004)

Philosophy As a member of society, we shall proudly promote activities List of Social Contribution Activities that contribute to social development. Engaging in diverse activities that reflect the basic policy Principles The Nippon Paper Group engages in a diverse range of activities 1. We shall pursue activities that contribute to cultural based on its Philosophy and Principles for Social Contribution heritage and development. Activities. The nature and content of these activities encompass 2. We shall pursue activities that contribute to conservation a wide range of areas including education, the environment, and and improvement of the environment. coexistence with the community and society. Summaries of major 3. We shall pursue activities that contribute to the themes are presented in the table to the right. For more detailed development of communities. information on the Group’s major social contribution activities, please refer to the following website. WEB Social Contribution Activities http://www.nipponpapergroup.com/e/csr/social.html

94 Nippon Paper Group Sustainability Report 2012 The Nippon Paper Group’s principal social contribution activities* Category Principal Activities Specific Examples Page No.

Providing opportunities to tour Group 96 companies and their facilities Organizing tours of the Group’s mills Providing opportunities for work experience Promoting internship programs 96

Learning opportunities — conducted by employees Organizing onsite and classroom lessons

Promoting awareness through the School of Friendship for Forests 97 Utilizing Company-owned forests and Paper Educational Activities Providing educational opportunities Inviting young children and students to Sapporo Symphony Orchestra — through music pop concerts Holding Little League baseball clinics and tournaments 97 Providing educational opportunities Holding ice hockey classes and ice hockey championships — through sport Donating unicycles; holding unicycle classes 97 Supplying educational institutions with paper products — Providing products to classrooms Supplying educational institutions with printed materials and publications 96 Utilizing the Group’s proprietary in-container rooting technology 46 Promoting Morino Chonai-kai activities 98 Preserving biodiversity Establishing a sanctuary for Blakiston’s fish owl 47 Supporting the activities of the Shirane-aoi Preservation Group 98 Operating the Recycle Plaza Shiyukan 98 Environmental Collecting and recycling wooden chopsticks — Activities Promoting recycling activities Supporting the activities of organizations dedicated to promoting recycling 52 Establishing a waste paper collection facility — Recovering and recycling milk cartons 52, 98 Adding greenery to local communities Promoting and participating in afforestation activities 46

Providing opportunities for Holding global environment forums (open seminars) 44 environmental education Participating in a variety of environmental events —

Engaging in clean-up activities of areas surrounding the Group’s mills 99 Regional cleaning activities and works Engaging in activities that focus on the safety of children — Local community safety and Engaging in road safety activities — disaster prevention Executing disaster relief and support agreements —

Participating in campaigns to preserve the cultural value of Japan’s — Preserving local community cultures cherry blossoms Activities Aimed at Promoting Supporting Asukayama Takagi Noh plays 99 Coexistence with Community Responsibility Maintaining the multi-faceted functions inherent in forests through the — Local Communities proper management of Company-owned forests Engaging in local community revitalization activities 99

Opening the Group’s recreational facilities including gymnasiums to the — Coexistence with local communities general public Leasing free-of-charge Company-owned land 6 Supporting sporting events including the Naha and Fukuchiyama marathons — Holding events including summer festivals and winter sports carnivals —

Supporting events run by social welfare organizations — Management and Policy Social welfare activities Purchasing products (food and other items) from social welfare organizations — Donating used stamps and postcards as well as blood — Activities Aimed at Supporting sporting opportunities for — Promoting disabled persons Supporting ice sledge hockey Coexistence with Society Providing opportunities for employees to Organizing buses for travel by volunteers in support of victims of the Great — engage in volunteer activities East Japan Earthquake

Supporting the Fujihara 99 Foundation of Science Providing financial support to the Fujihara Foundation of Science Supporting victims of natural disasters Providing donations as well as relief supplies 8 * Please refer to pages 62 to 65 for information at activities at overseas afforestation areas.

Nippon Paper Group Sustainability Report 2012 95 Community Responsibility Educational Activities The Nippon Paper Group plays an important role in providing young children with a variety of learning opportunities. In an effort to support sound and healthy growth, the Group organizes tours of its domestic production facilities, puts in place a wide range of work experience programs and provides the chance to participate in sporting and artistic events.

Case Making products by hand at the Kids Job Providing Opportunities to Tour Group Companies Study 2011 Exhibition and Their Facilities (Nippon Paper Industries Co., Ltd.) Organizing tours of the Group’s mills to showcase the importance of a recycling-based society through paper In August 2011, the Fuji Mill, owned and operated by Nippon Paper Industries, set up a booth to provide visitors In fiscal 2011, 10,053 elementary, junior and senior high school with experience in making products by hand as a part of its students toured the Group’s production facilities. participation in the Fujisanmesse Kids Job 2011 Exhibition organized by Fuji City and Fujisanmesse. The Kids Job Case Holding a parent-child paper experience tour Study (Nippon Paper Industries Co., Ltd.) initiative is designed to provide children with an insight into what it is like to work and pursue a career. Despite the In November 2011, the Yatsushiro Mill, owned and inclement weather, approximately 7,000 children and adults operated by Nippon Paper Industries, held a parent-child attended the event. paper experience tour, opening the mill to the public and 20 employees from the Fuji Mill participated in providing a forum for parents and children. The goal was to the Exhibition. A booth was set up to allow visitors to improve ties with the local community. 31 fifth year students participate in the making of recycled postcards from used from the neighboring Otago paper packs by hand. With an endless stream of willing elementary school and their participants, approximately 500 people took part over a parents were invited to two-day period. Through this opportunity to make paper, participate in paper making children were introduced and to tour the mill. Students to the importance of and parents also enjoyed a paper packs as a precious barbeque while viewing a Experience of resource. In addition to video of the Mill. papermaking by hand providing children with the satisfaction of creating original postcards, this initiative attracted wide Fuji Mill’s exhibition booth Providing Opportunities for Work Experience acclaim from parents. Providing the younger generation of the future with practical work experience Providing Products for Use in the Classroom Case Work experience for high school and Study international students Helping young children with their studies by donating (NIPPON PAPER-PAK CO., LTD.., Nippon Paper free-of-charge paper and printed materials to local Industries Co., Ltd.) community educational institutions

Over a five day period in July 2011, MIKI NIPPON PAPER- Case Providing student newspapers to local schools PAK CO., LTD., a manufacturing subsidiary of NIPPON Study (NIPPON PAPER LOGISTICS CO., LTD.) PAPER-PAK, accepted a second year student from Mikihigashi High School in Hyogo Prefecture as a part of NIPPON PAPER LOGISTICS has continued to provide an internship program. The program included an overview schools in close proximity of its head office with the Mainichi of the paper-pack manufacturing process, and experience Student Newspaper since 2007 free of charge. Deliveries of the plate making section, the printing section, and were initially made to Oji Elementary School and Oujisakura the carton side seaming section. Moreover, the R&D Junior High School. Following their relocation, the company Department of Nippon Paper commenced free deliveries Industries has continued to the Higashijuujou to receive students from Elementary School and around the world as a part of the Asuka Senior High a summer student program School from 2009. These since 1991. Over a period of newspapers are used around one to two months, Practical training in the supply as learning materials for students participate in paper of semi-finished products at the carton pasting department children and students. and pulp research activities. Newspapers and brochures provided free of charge

96 Nippon Paper Group Sustainability Report 2012 Utilizing Company-owned Forests in Japan Providing Educational Opportunities through Sport Promoting a better understanding of the many benefits Helping to revitalize society through sporting classes that forests provide while utilizing Company-owned and tournaments forests in Japan Case Conducting baseball classes for high school Study Case Conducting the annual School of Friendship for students in Fukushima and Miyagi prefectures Study Forest and Paper (Nippon Paper Industries Co., Ltd.) (Nippon Paper Industries Co. Ltd., Nippon Paper Development Co., Ltd.) In October 2011, players from Nippon Paper Industries’ Ishinomaki Mill baseball team participated as instructors in The School of Friendship for Forest and Paper is a hands- a baseball clinic organized over a two-day period by the on course on the natural environment conducted within Fukushimaken High School Baseball Federation. This clinic forests (approximately 90,000 hectares) owned by Nippon brought together around 380 high school students from Paper Industries in Japan. With the aim of introducing within Fukushima Prefecture and instructors. participants to the beauty and abundance of forests owned After the opening ceremony, participants engaged by the company, the school is also an opportunity to in warming up exercises followed by practical training experience the connection between nature and everyday sessions by position. Instructors from the mill’s baseball life. This initiative was first launched in the Sugenuma team were aggressive in providing guidance to participating forest of Gunma Prefecture, one of the company’s leading high school students with batting practice replicating actual metropolitan-based forests in October 2006. game situations. Running in conjunction with this practical The common programs that make up the school draw training, the Ishinomaki team’s trainer, Kazuki Nishikawa, heavily on the knowledge and experience of employees. provided guidance and coaching to instructors. With Group employees serving as guides, for example, Ishinomaki Mill baseball team members also took part participants enjoy walks through the forest as well as in a clinic organized by the East Chapter of the Miyagiken lessons on how to make paper from twigs. In addition the High School Baseball Federation in November 2011. This Japan Philanthropic Association cooperates in accepting clinic was attended by approximately 190 high school participants drawn from the general public. Despite its students from the Ishinomaki district and instructors. cancellation in the spring of 2011 due to impact of the Great East Japan Earthquake, the Sugenuma forest school has been held on an annual basis since its inception. Case Donating unicycles to elementary schools in October 2012 marked the 13th time the school was held. Study Kagawa and Ehime prefectures Over this period a total of 442 children, parents and local (SHIKOKU COCA-COLA BOTTLING CO., LTD.)

high school students have attended the school. Community Responsibility Since 2007, the Toyono School of Friendship for SHIKOKU COCA-COLA BOTTLING has continued to Forests and Paper has been held each year in Nippon donate unicycles to elementary schools in Shikoku since Paper Industries’ Toyono forest in Kumamoto Prefecture. 1996. In fiscal 2011, the company donated a total of 50 Organized mainly by the company’s Yatsushiro Mill, unicycles to eight elementary schools recommended particular emphasis is placed on activities deeply rooted by the school boards of Kagawa and Ehime prefectures in the local community. One program of this school in September. Attracting wide acclaim as an educational

incorporates such activities as a mill tour with programs tool that can help stimulate the interest of children Educational Activities modified to accommodate the needs of each region. while effectively developing the nervous system and concentration, unicycles are included in the curriculum guidelines issued by Japan’s Ministry of Education, Culture, Sports, Science and Technology. SHIKOKU COCA-COLA BOTTLING has to date donated a total of 750 unicycles in the hope that this outstanding educational A ceremonial photograph of all Families taking part in making involved parties paper by hand tool will contribute to the healthy development and growth of children of the Children participating in a class next generation. using unicycles donated by SHIKOKU COCA-COLA BOTTLING

Nippon Paper Group Sustainability Report 2012 97 Community Responsibility Environmental Activities Placing particular emphasis on environmental conservation activities that take into consideration the characteristics of each region and works

Preserving Biodiversity Promoting Recycling Activities Protecting and cultivating rare species while utilizing the Consistently engaging in recycling and related Group’s management resources educational activities

Case Supporting the activities of the Shirane-aoi wo Case Visitors to the Recycle Plaza Shiyukan reach 100,000 Study Mamoru Kai (Shirane- aoi Preservation Group) Study (Nippon Paper Industries Co., Ltd.) (Nippon Paper Industries Co., Ltd., Nippon Paper Development Co., Ltd.) The Recycle Plaza Shiyukan, run by the Asahikawa Works in the Hokkaido Mill, owned and operated by Nippon Paper Shirane-aoi (Glaucidium palmatum: Japanese wood poppy) Industries, achieved the milestone of 100,000 visitors on is a perennial designated as a semi-endangered species January 12, 2012. The 100,000th visitor was a female in the Red Data Book of Gunma Prefecture. To protect resident of Asahikawa City who came to view the exhibits and breed this plant species, the Shirane-aoi Preservation displayed in the Exhibition Hall. A brief ceremony with a Group was set up in December 2000 mainly at the initiative decorative banner made by Plaza staff was followed by the of Gunma Prefectural Oze High School and the residents of presentation of a commemorative gift. the village of Katashina in Tone-gun, Gunma Prefecture. Making use of a former infirmary, Shiyukan opened on Nippon Paper Development, which runs the Marunuma October 20, 1999 (Recycling Day) to promote increased Kogen Resort, has supported the Shiraneaoi Preservation awareness toward the current status and importance of Group since its inception. paper recycling. As an experience-based facility, Shiyukan Nippon Paper Industries allows visitors to make paper by hand. In addition to has offered a portion of its families as well as elementary, junior and senior high school company-owned Sugenuma students, the Recycle Forest as a plantation site Plaza Shiyukan for Shirane-aoi. Since 2002, welcomes visitors the Group has called for from a variety of volunteers to participate in Planting trees together with a associations, residents planting and other activities. student form Oze High School of Asahikawa City as well as people from outside Hokkaido, and The Recycle Plaza Shiyukan Case Participating in Morino Chonai-Kai in collaboration international travelers. Study with the local community (Nippon Paper Industries Co., Ltd.)

Case Making toilet paper from school lunch milk cartons Forests represent a precious renewable resource. Forestry Study (Nippon Paper Crecia Co., Ltd.) preserves national land, cultivates water resources and prevents global warming. Thinning, which entails the To promote recycling activities, Nippon Paper Crecia’s trimming of excess growth, and efforts to promote healthy Tokyo Mill makes toilet paper by using the school lunch development and luxuriant undergrowth, help forests carry milk cartons from local elementary and junior high schools out these functions. Recently, however, thinning activities in the city of Soka. This toilet paper is then returned to have fallen below adequate levels due mainly to the each school. deterioration in earnings experienced by the forestry industry. Members of elementary school PTAs are invited to Launched by the environmental NPO Office Chonai-Kai, the Mill to view the making of products from recycled to promote thinning, the Morino Chonai-Kai is a mechanism resources. This initiative is designed to deepen interest in that offsets forest thinning costs. This entails the purchase recycling activities. and use of “forest thinning support paper,” which includes a portion of the thinning costs, by companies that agree with forest thinning. As a supporter, the Nippon Paper Group was a participant in the Kanagawa Prefecture Morino Chonai-Kai, the Kansai Morino Chonai-Kai, and the Hokkaido Morino Chonai-Kai as of September 2012.

Providing an explanation about recycling in front of stacks of recovered milk cartons

98 Nippon Paper Group Sustainability Report 2012 Community Responsibility Activities Aimed at Promoting Coexistence with Local Communities and Society Working in partnership with local government authorities and residents to help build clean and safe living environments while reenergizing regional economies

Regional Cleaning Activities Coexistence with Local Communities Maintaining clean city and town environments Strengthening ties with local communities through such initiatives as the introduction of interactive CSR activities Case Participating in the a campaign to clean up Study Iwakuni Harbor Case The Happy Shikoku Project (Nippon Paper Industries Co., Ltd. and other Study (SHIKOKU COCA-COLA BOTTLING CO., LTD.) Group companies) SHIKOKU COCA-COLA BOTTLING announced details of the The annual cleanup of Iwakuni Harbor was held on July 20, Happy Shikoku Project, a new CSR initiative, in April 2012. 2011. 84 employees from the Iwakuni Mill of Nippon Paper Based in Shikoku and supplying to the area, the Industries, the Iwakuni Works of Nippon Paper Chemicals, company is supported by the local community. Aiming to Nippon Paper Logistics, and other Group companies bring happiness to Shikoku through its business activities, participated. the company launched the Happy Shikoku Project. Under Organized by the Port Authority of Iwakuni Harbor, and the “Happy Shikoku” icon, the company intends to promote other agencies, this CSR activities interactively initiative aims to maintain by calling for ideas to a pleasant public wharf bring joy to Shikoku from environment. Group its stakeholders. Also, a employees removed portion of the proceeds weeds near the Mill, of the company’s sales is cleaned up street gullies, Clean-up activities at Iwakuni Harbor being earmarked for social and collected rubbish. contribution programs. Announcing details of the Happy Shikoku Project

Preserving Local Community Cultures Supporting the Fujihara Foundation of Science Supporting opportunities to experience traditional cultures Supporting efforts to further advance science and technology Case Supporting the Asukayama Takigi Noh Play Considered the “Nobel Prize of Japan,” the Fujihara Award, Study (Nippon Paper De velopment Co., Ltd.) presented by the Fujihara Foundation of Science, recognizes Community Responsibility outstanding contributions to science and technology by Japanese The Asukayama Takigi Noh Play (torchlight Noh scientists. Nippon Paper Industries lends financial support to the Performance) was conceived by the late Shigeya Kimura, a Foundation to promote science and technology. noh actor born and raised in Tokyo’s Kita Ward. Mr. Kimura In June 2012, the 53th Fujihara Award was bestowed on Dr. wanted to give something back to his hometown through Kenji Fukaya, of the Department of Mathematics at the Graduate his expertise. The play is held each year in autumn at an School of Science, Kyoto outdoor stage in Asukayama Park, Kita Ward. As a member University and Dr. Hisashi of the local community, Nippon Paper Development has Yamamoto, of the Institute and Society Promoting Coexistence with Local Communities at Aimed / Activities Activities Environmental undertaken a variety of duties including reception tasks in of Science and Technology its efforts to support the running of the event over the past Research Molecular Catalyst five years. Research Center. Each The 9th Asukayama Takigi Noh Play was held in received a gold medal, A commemorative photograph taken October 2011 featuring certificate, and honorarium of after the presentation ceremony performances of the ¥10 million. Kyogen (comic drama) Tsutoyamabushi by living national treasure Mansaku Nomura, and Koi no omoni by the Kanze style Noh actor An outdoor performance of Manzaburou Umewaka. a Noh play

Nippon Paper Group Sustainability Report 2012 99 Guideline Comparison Table (GRI Ver 3.1)

ISO 26000 Corresponding ISO 26000 Corresponding Item clauses Page(s) Contents Item clauses Page(s) Contents 1 Strategy and Analysis 4.15 28 Contact Points that Allow 1.1 4–5 Message from the President Dialog with Stakeholders 6.2 4–5 Message from the President 26–27 IR Activities 1.2 12–15 Building a Sustainable Future Contact Points that Allow 28 Dialog with Stakeholders 2 Organizational Profile 36 Environmental Communication Outline of the Nippon 2.1 16 Paper Group Contributing to Local 4.16 62–65 Communities at Overseas Outline of the Nippon Afforestation Areas 2.2 17 Paper Group 6.2 70, 73, 75, 77, 79 Responding to Customers Outline of the Nippon 2.3 6.2 17–18 Paper Group Industrial Relations, Fair 85, 89 Evaluation and Compensation Outline of the Nippon 2.4 16 Paper Group 94–99 Community Responsibility 2 Editorial Policy 16, 18 Outline of the Nippon Paper Group 4.17 36 Environmental Communication Countries of Production and Blakiston’s Fish Owl 47 Protection Activities 2.5 55 Species of Woodchips the Group Procured 5 Management Approach and Performance Indicators from Overseas Economic Performance Indicator 59 Promoting Overseas Afforestation 4–5 Message from the President Outline of the Nippon DMA* 6.2 / 6.8 2.6 16 Paper Group 22–23 CSR Management Outline of the Nippon 16 Outline of the Nippon 2.7 17 Paper Group Paper Group Reconstruction following the 16 Outline of the Nippon 6.8 / 6.8.3 / 6 Paper Group EC1. Core Great East Japan Earthquake 2.8 6.8.7 / 6.8.9 38–39 Material Balance Profit Distribution to 27 Shareholders Outline of the Nippon 2.9 17 Paper Group 37 Environmental Accounting External Awards for 37 Environmental Accounting EC2. Core 6.5.5 2.10 29, 36 Environmental 12–15 Building a Sustainable Future Conservation Activities EC3. Core — — 3 Report Parameters EC4. Core Not Applicable — 3.1 2 Period Covered 3.2 Back cover Issued EC5. Add 6.4.4 / 6.8 — — 3.3 Back cover Issued Philosophy and Basic EC6. Core 6.6.6 / 6.8 / 54 Policies Concerning Raw 3.4 Back cover Inquiries 6.8.5 / 6.8.7 Materials Procurement 2 Editorial Policy 3.5 EC7. Core 6.8 / 6.8.5 / — — 28-29 Dialog with Stakeholders 6.8.7 Scope of 6–11 Reconstruction following the 3.6 2 Organizations Covered Great East Japan Earthquake 44–47 Biodiversity Conservation 3.7 2 Scope of Organizations Covered 6.3.9 / 6.8 / Protection and 3.8 Not applicable — EC8. Core 6.8.3 / 6.8.4 / 60–61 Cultivation of Domestic 6.8.5 / 6.8.6 / Company-owned Forests 3.9 37 Environmental Accounting 6.8.7 / 6.8.9 Contributing to Local 3.10 Not applicable — 62–65 Communities in Overseas 3.11 2 Scope of Organizations Covered Afforestation Areas 3.12 100–102 Guideline Comparison Table 94–99 Community Responsibility 3.13 7.5.3 — 6.3.9 / 6.6.6 / 6–11 Reconstruction following the 4 Governance, Commitments, and Engagement 6.6.7 / 6.7.8 / Great East Japan Earthquake EC9. Add 6.8 / 6.8.5 / Contributing to Local 4.1 20 Group Governance 6.8.6 / 6.8.7 / 62–65 Communities at Overseas 4.2 20 Group Governance 6.8.9 Afforestation Areas 4.3 20 Group Governance Environment Performance Indicatior 20 Group Governance Environment (Policy and 4.4 32–39 Management, Material Balance, 85 Industrial Relations Environmental Accounting) 4.5 21 Compensation DMA* 6.2 / 6.5 44 Biodiversity Conservation Paid to Directors Raw Materials Procurement 4.6 20–21 Group Governance (Policy and Management, 54–55 Current Status of Raw 4.7 — — Materials Procurement) 4-5 Message from the President 38–39 Material Balance 4.8 The Nippon Paper Group’s EN1. Core 55 Current Status of Raw 22 Action Charter Materials Procurement 20 Group Governance EN2. Core 52 Promotion of Recycled Paper Use 38–39 Material Balance 22 CSR Management EN3. Core 4.9 41 Mitigation of Climate Change 6.2 Signatory to the United 23 Nations Global Compact EN4. Core 38–39 Material Balance 34 Environmental Management EN5. Add 40–41 Mitigation of Climate Change 6.5 / 6.5.4 4.10 — — 40–42 Mitigation of Climate Change 40–43 Mitigation of Climate Change EN6. Add One of the largest 43 corporate users of biomass 4.11 44–47 Biodiversity Conservation energy in Japan 91 Safety (Risk Assessment) EN7. Add — The United Nations EN8. Core 38–39 Material Balance 4.12 23 Global Compact EN9. Add 47 Source Water Participation in Industry and Protection Activities Trade Associations and EN10. Add — — 4.13 23 Advisory Organizations in Japan and Overseas Biodiversity Data for EN11. Core 61 Company–owned Forests in 28 Contact Points that Allow Japan (IUCN) Dialog with Stakeholders 6.5 / 6.5.6 44–47 Biodiversity Conservation 4.14 The Nippon Paper Group’s EN12. Core 95 Principal Social 56–59 Sustainable Procurement of Contribution Activities Raw Materials * DMA: Disclosure(s) on Management Approach

100 Nippon Paper Group Sustainability Report 2012 ISO 26000 Corresponding ISO 26000 Corresponding Item clauses Page(s) Contents Item clauses Page(s) Contents Protection and 6.4 / 6.4.6 / EN12. Core 60–61 Cultivation of Domestic LA8. Core 6.8 / 6.8.3 / 92 Efforts regarding Hygiene Company–owned Forests 6.8.4 / 6.8.8 and Health Forest Management that Takes LA9. Add 6.4 / 6.4.6 — — into Consideration Biodiversity 6.5 / 6.5.6 45 24 Compliance Training EN13. Add Protection and 60–61 Cultivation of Domestic 25 Respect for Company–owned Forests Intellectual Property LA10. Core 6.4 / 6.4.7 EN14. Add 44–47 Biodiversity Conservation Environmental Education 36 and Training EN15. Add — — 88–89 Cultivating Human Resources 38–39 Material Balance EN16. Core 6.4 / 6.4.7 / Development of Lifelong as 40–43 Mitigation of Climate Change LA11. Add 89 6.5 / 6.5.5 6.8.5 well as Career Plans EN17. Core — — Fair Evaluation EN18. Add 40–43 Mitigation of Climate Change LA12. Add 6.4 / 6.4.7 89 and Compensation EN19. Core Substances Subject to the 51 PRTR Law 6.3.7 / 6.3.10 / 16 Company Profile LA13. Core 6.4 / 6.4.3 38–39 Material Balance 85 The Status of Employment EN20. Core Initiatives to Prevent 6.3.7 / 6.3.10 / 49 Environmental Pollution LA14. Core 6.4 / 6.4.3 / — — 6.4.4 38–39 Material Balance Human Rights Performance Indicatior EN21. Core Initiatives to Prevent 49 Environmental Pollution Human Rights, Employment 6.5 / 6.5.3 84 and Labor (Policy and 38–39 Material Balance DMA* 6.2 / 6.3 Management) EN22. Core Reducing Waste Generation 48 and Final Disposal Basic Policy concerning Raw 54 Materials Procurement Breaches of Statutory EN23. Core 35 Requirements and the Status HR1. Core 6.3 / 6.3.3 / — — of Accidents 6.3.5 / 6.6.6 Promoting Procurement that EN24. Add 48 Promoting Proper 6.3 / 6.3.3 / Waste Management Takes into Consideration HR2. Core 6.3.5 / 6.4.3 / 56 Environmental and 6.5 / 6.5.4 / 6.6.6 Social Concerns EN25. Add 6.5.6 — — HR3. Core 6.3 / 6.3.5 — — 6.5 / 6.5.4 / Development of Environmentally EN26. Core 6.6.6 / 6.7.5 80–82 Friendly Products 6.3 / 6.3.6 / HR4. Core 6.3.7 / 6.3.10 / — — 6.5 / 6.5.4 / Promotion of Recycled 6.4.3 EN27. Core 6.7.5 52 Paper Use 6.3 / 6.3.3 / Breaches of Statutory 6.3.4 / 6.3.5 / EN28. Core 6.5 35 Requirements and the Status HR5. Core 6.3.8 / 6.3.10 / — — of Accidents 6.4.3 / 6.4.5 EN29. Add 6.5 / 6.5.4 / 42 Logistics–Related Initiatives Philosophy and Basic Policy on 6.6.6 84 Human Rights, Employment EN30. Add 6.5 37 Environmental Accounting and Labor HR6. Core Product Responsibility Performance Indicator Promoting Procurement that Takes Customers (Policy and 56 into Consideration Environmental 68–69 Management) 6.3 / 6.3.3 / and Social Concerns DMA* 6.2 / 6.6 / 6.7 6.3.4 / 6.3.5 / Philosophy and Basic Policy on Customers (Group Company 6.3.7 / 6.3.10 70–79 Activities) 84 Human Rights, Employment and Labor Customers (Product Safety 68–69 HR7. Core PR1. Core 6.3.9 / 6.6.6 / Management System) Promoting Procurement that 6.7 / 6.7.4 / 56 Takes into Consideration 6.7.5 70–79 Group Company Activities Environmental and PR2. Add — — Social Concerns 6.3 / 6.3.5 / PR3. Core 6.7 / 6.7.3 / 68–79 Customer Responsibility HR8. Add 6.4.3 / 6.6.6 — — 6.7.4 / 6.7.5 / 6.3 / 6.3.6 / 6.7.6 / 6.7.9 Verification and Audit of PR4. Add 69 Recycled Paper HR9. Add 6.3.7 / 6.3.8 / — — 6.6.7 6.7 / 6.7.4 / PR5. Add 6.7.5 / 6.7.6 / 70–79 Customers HR10. Core — — 6.7.8 / 6.7.9 (Group Company Activities) HR11. Core — — Activities of Nippon Paper Society Performance Indicatior PR6. Core 6.7 / 6.7.3 / 74–75 Crecia Co., Ltd. 6.7.6 / 6.7.9 20–21 Group Governance PR7. Add Not applicable — 24–25 Compliance PR8. Add 6.7 / 6.7.7 — — DMA* 6.2 / 6.6 / 6.8 54 Raw Materials Procurement PR9. Core 6.7 / 6.7.6 — — (Policy and Management) Labor Practices and Decent Work Performance Indicatior Community (Policy and 94–95 Management) Human Rights, 6.3.9 / 6.6.7 / Employment and Labor SO1. Core 6.8 / 6.8.5 / — 84–85 (Policy and Management, 6.8.7 6.2 / 6.4 / the Status of Employment, DMA* Industrial Relations) Initiatives to Prevent 6.3.10 SO9. Core 49 Environmental Pollution Occupational Safety and Initiatives to Prevent 90 Health (Basic Policy, Promotion SO10. Core 49 Environmental Pollution System) SO2. Core — — LA1. Core 85 The Status of Employment 6.4 / 6.4.3 SO3. Core 24 Compliance Training LA2. Core 85 The Status of Employment 6.6 / 6.6.3 6.4 / 6.4.3 / Creating Workplaces that SO4. Core — — LA3. Add 6.4.4 86–87 Support Employee Diversity 6.3 / 6.4 / Participation in Industry and LA15. Core 6.4.3 / 6.4.4 / — — SO5.Core 23 Trade Associations and 6.4.5 6.6 / 6.6.4 / Advisory Organizations in 6.3.10 / 6.4 / 6.8.3 Japan and Overseas LA4. Core 6.4.3 / 6.4.4 / — — 6.4.5 SO6. Add — — 6.4 / 6.4.3 / Notification regarding Major LA5. Core 6.4.4 / 6.4.5 85 Work–related Changes 6.6 / 6.6.5 / SO7. Add 6.6.7 Not applicable — LA6. Add — — 6.4 / 6.4.6 6.6 / 6.6.7 / LA7. Core 91 Status of Occupational Accidents SO8. Core 6.8.7 Not applicable —

Nippon Paper Group Sustainability Report 2012 101 Guideline Comparison Table (Environmental Reporting Guidelines (2012))

Corresponding Corresponding Item Page(s) Contents Item Page(s) Contents Basic Issues of Environment Reporting Information and Indicators that Describe the Status of Activities for Environmental Impacts and Reduction Measures 1. (1) 2, Back Cover Editorial Policy, Next Issue 1. (1) 38–39, 40–43 Material Balance, Mitigation of Climate Change 1. (2) 2, 3 Editorial Policy 1. (3) 2, 3 Editorial Policy Material Balance, Promotion of Recovered 1. (2) 38–39, 52, 64–66 Paper Use, Materials Procurement and 1. (4) 2, 3 Editorial Policy Forest Responsibility 2 4–5 Message from the President 1. (3) 38–39, 49 Material Balance, Preventing Water Pollution 3. (1) 16–18, 32 Outline of the Nippon Paper Group, Policy and Climate Change (Black liquor), Reducing Waste Management 2 43, 48 Generation and Final Disposal Environmental Action Plan 2015 Fiscal 2011 3. (1) 38–39 Material Balance 3. (2) 33 Results 3. (2) 38–39, 40–43 Material Balance, Mitigation of Climate Change 3. (3) 33 Environmental Action Plan 2015 Fiscal 2011 Results 3. (3) 38–39, 49 Material Balance, Preventing Water Pollution 4 38–39 Material Balance 3. (4) 38–39, 49 Material Balance, Preventing Air Pollution The Status of Environmental Management (MPI) 3. (5) 38–39, 50–51 Material Balance, Controlling Chemical Substances 1. (1) 32–33 Policy and Management 3. (6) 38–39, 48 Material Balance, Reducing Waste Generation and 1. (2) 12–15 Building a Sustainable Future Final Disposal 2. (1) 34 Environmental Management Promotion Structure 3. (7) 50–51 Controlling Chemical Substances 2. (2) 34–35 Policy and Management 4 44–47 Biodiversity Conservation Breaches of Statutory Requirements and The Status of Environmental Management from Economic and Social Perspectives 2. (3) 35–36 the Status of Accidents, 1. (1) 37 Environmental Accounting Environment–related Complaints 1. (2) 27 Management (Dividends) 3. (1) 28–29, 36 Dialog with Stakeholders, Environmental Communication 20–30, 68–82, Management, Customers, Human Rights, 2 84–92, 94–99 Employment and Labor, Community Responsibility 3. (2) 94–99 Community Responsibility Policy and Management (Environment), Policy and Other Issues 4. (1) 32–33, 54–55 Management (Raw Materials Procurement) 1 2 Scope of Organizations Covered (The Four 4. (2) 64–66 Materials Procurement and Forest Responsibility Companies Merger on October 1, 2012) 4. (3) 80–82 Development of Environmentally Friendly Products 2 103 Third–Party Comments 4. (4) 14–15 Building a Sustainable Future 4. (5) 42 Logistics–Related Initiatives 4. (6) 59 Promoting Overseas Afforestation Reducing Waste Generation and Final Disposal, 4. (7) 48, 52 Promotion of Recycled Paper Use

Comparison Table (the United Nations Global Compact)

Corresponding Principles Page(s) Contents Human Rights Raw Materials Procurement (Promoting Procurement that Takes into Principle 1 Businesses should support and respect the protection of 54–56, 84–92 Consideration Environmental and Social Concerns), Human Rights, internationally proclaimed human rights. Employment and Labor Responsibility Raw Materials Procurement (Promoting Procurement that Takes into Principle 2 Businesses should make sure that they are not complicit in 54–56, 84–92 Consideration Environmental and Social Concerns), Human Rights, human rights abuses. Employment and Labor Responsibility Labor Standards Businesses should uphold the freedom of association and the Human Rights, Employment and Labor Responsibility Principle 3 effective recognition of the right to collective bargaining. 85 (Industrial Relations) Raw Materials Procurement (Promoting Procurement that Takes into Principle 4 Businesses should uphold the elimination of all forms of forced 54–56, 84 Consideration Environmental and Social Concerns), Human Rights, and compulsory labor. Employment and Labor Responsibility Raw Materials Procurement (Promoting Procurement that Takes into Principle 5 Businesses should uphold the effective abolition of 54–56, 84 Consideration Environmental and Social Concerns), Human Rights, child labor; and Employment and Labor Responsibility Businesses should uphold the elimination of discrimination in Human Rights, Employment and Labor Responsibility (Policy and Principle 6 respect of employment and occupation. 84, 87 Management, Creating Workplaces that Support Employee Diversity) Environment Environment (Policy and Management, Mitigation of Climate Change, Principle 7 Businesses should support a precautionary approach to 32–39, 40–43, Biodiversity Conservation), Raw Materials Procurement (Policy and environmental challenges. 44–47, 54, 56–59 Management, Sustainable Procurement of Raw Materials) Message from the President, Building a Sustainable Future, Principle 8 Businesses should undertake initiatives to promote greater 4–5, 12–15, Environmental Responsibility, Materials Procurement and Forest environmental responsibility. 32–52, 54–65 Responsibility Businesses should encourage the development and diffusion of Environment (Biodiversity Conservation, Utilizing Proprietary Technologies), Principle 9 environmentally friendly technologies. 46, 80–82 Customers (Development of Environmentally Friendly Products) Anti-Corruption Businesses should work against corruption in all its forms Management (CSR Management, Compliance), Raw Materials Principle 10 including extortion and bribery. 22–23, 24–25, 54 (Procurement and Management)

Message from the President, Participation in the United Nations Signatory to and Participation in the United Nations Global Compact 4–5, 23 Global Compact

102 Nippon Paper Group Sustainability Report 2012 Third-Party Comments / Action in Response to Third-Party Comments

Third-Party Comments

In its Fourth Medium-Term Business Plan, launched in April 2012, the Nippon Paper Group has further clarified the purpose and purport of its ongoing sustainability strategies. In this regard, Nippon Paper is to be highly commended for its shift toward a business model that places a premium on growth as a comprehensive player in biomass businesses. This shift reflects a significant evolution in the Group’s traditional business structure that emphasized the cultivation and then use of forests within a resource-dependent industry to a sound material-cycle model that conforms to the critical need to secure a sustainable society. Information on the current status and potential of those new business fields, including industrial materials and biomass Yoshinao Kozuma energy, that form the nucleus of the Nippon Paper Group’s aforementioned strategy remains limited. The level Professor, Faculty of of medium-term growth that can be expected in each market is therefore unclear. Despite this uncertainty, Economics, the success of this strategy will undoubtedly play a major role in solving such global environmental issues as Sophia University climate change, constraints of resources, and biodiversity. In conjunction with the release of its Green Action Plan 2015, the Nippon Paper Group updated its [ Profile ] Environmental Action Plan by newly introducing and focusing on the value chain and traceability. Efforts After leaving the Sophia University Graduate School of to enhance traceability with respect to the procurement of forest resources are in particular an effective Economics upon completion of the latter period of his countermeasure against the issue of illegal logging, which is currently a major driving force behind moves to doctoral course, Yoshinao bolster regulations in Europe, and a useful tool in developing CSR management through the value chain. As Kozuma became a research assistant at the Nagoya to solid waste, however, which has been controlled so far through the quantity of final disposal steps are now Institute of Technology being taken to commence the use of a recycling rate and the setting of reduction targets. In this context, the and attended the Limperg Instituut, the Inter-University need may arise to disclose performance. Institute for Accounting and Auditing in the Netherlands, Compared with the previous fiscal year, the Nippon Paper Group has further clarified the position and as a guest researcher role of the Highlight Edition of its Sustainability Report. In addition to upgrading and expanding the social funded by the Dutch government. He became aspects and information contained in the 2012 report, the Group’s social activities are presented in an easier- an associate professor at to-understand manner. In similar fashion, the value chain map in the 2011 report, which was limited to some the University of Shizuoka School of Administration examples of the Group’s environmental activities, has been improved to set out all performance on material and Informatics, and then took up his current position CSR issues in general including social aspects. At the same time, the extent and nature of information has as professor in the Faculty been significantly developed this year*. Since these are actually regarded as improvements in response to of Economics at Sophia University. He has held my comments of the previous year, one can easily understand how the PDCA activities of the Group work successive positions as the chair or member of various effectively. CSR- or environment- At the other extreme, little progress has been made with respect to the quality of disclosure on overseas related advisory panels, study groups, and research facilities. Important overseas factories are excluded from the reporting boundary and information on labor conferences for the Ministry practices is limited to that of Group companies in Japan. This means that there exists room for further of the Environment; the Ministry of Economy, Trade improvements in promoting value chain-based CSR management. It would be desirable if the Nippon Paper and Industry; the Ministry of Land, Infrastructure and Group could disclose much better information on labor practices including its workforce at overseas facilities Transport; the Cabinet Office; with less information regarding domestic Group companies. and the Japanese Institute of Certified Public Accountants. * Value Chain Map http://www.nipponpapergroup.com/e/csr/SustainabilityReport.html

Action in Response to Third-Party Comments

The Nippon Paper Group is endeavoring to promote sustainable growth and enhance its corporate value while transforming its business structure as a comprehensive player of biomass businesses. Drawing out the inherent qualities of trees as a renewable natural resource, we are working to develop and expand new businesses in addition to our traditional paper and related activities. We are convinced that these efforts will help establish a sustainable society. It is a source of considerable confidence to receive the praise of Professor Kozuma for our material-cycle model that conforms to the critical need to secure a sustainable society. In contrast, we will work to address the points raised and further expand the disclosure of overseas information in the next business term. In order to promote CSR management across the entire value chain, we will endeavor to disclose information that includes overseas Group companies and enhance dialog with stakeholders. Through these and other means, we will strive to address social issues around the world. Turning to the Ishinomaki Mill owned and operated by Nippon Paper Industries Co., Ltd., where damage Tsuyoshi Yamashita from the Great East Japan Earthquake was particularly severe, operations were resumed in full in August Executive Vice President, 2012. I would like to express my appreciation to all stakeholders whose support has been vital in bringing Representative Director and General Manager of about this recovery. As a member of the local community, we will continue to pursue the reconstruction and the CSR Division restoration of the Tohoku region. Nippon Paper Group, Inc.

Nippon Paper Group Sustainability Report 2012 103 Sustainability Report 2012 NIPPON PAPER GROUP, INC. 2 2 npi MATTE GREEN 70 (PEFC), Weight: g/m 157 Waterless printing with vegetable oil ink. The Paper Used in This Report Covers: Text pages: npi MATTE GREEN 70 (PEFC), Weight: 104.7 g/m Morino Chonai-Kai Morino The cost of the paper used in this report includes a portion of expenses for the use of timber discarded thinning. tree following forests in Mino Forest owned Mino Forest by Nippon Paper Industries Photographer: Itsumi Yuhji NIPPON PAPER GROUP, INC. NIPPON PAPER GROUP, 1-2-2 Hitotsubashi, Chiyoda-ku, Tokyo 100-0003, Japan 1-2-2 Hitotsubashi, Chiyoda-ku, Tokyo February 2013 February 2012 February 2014 CSR Department Phone: +81-3-6665-1015 Fax: +81-3-3217-3009 http://www.nipponpapergroup.com/e/csr/index.html Cover Photograph Head Office: Issued: issue: Previous Next issue: Inquiries: Website: